Pick-up in monsoon cheers agri-stocks

Pune /Mumbai: The monsoon rains are finally here, though late by one to two weeks. The delay has dampened the equity market sentiment, putting stocks linked to agricultural activity under pressure.

A study of the stock prices of major agri-input stocks shows most have been on a downhill journey from beginning of this month (see table). But their fortunes have tuned on Tuesday, with many of them gaining of 1 to 2 per cent on the BSE, as rainfall picked up pace in the early onset regions.

This year’s monsoon is particularly crucial for rural India where farm distress has been quite severe due to the 9 per cent fall in average rainfall last year. Companies producing agri input materials are still keeping their fingers crossed, despite weathermen’s comforting predictions about the rains.

“There was an initial delay in arrival of monsoon but now with its onset we are expecting positive rural sentiments leading to demand uptick in the September quarter, which also happens to be the beginning of the festival season,” Raman Mittal, Executive Director at Sonalika International Tractors, third largest tractor maker, told FC.

He said besides farming, tractors are now used in various non-agricultural activities, making it suitable for round the year utilisation.

Though June-September annual monsoon season, lifeblood of India’s $2.5 trillion economy, has covered half of India till date, the rainfall has recorded a deficit of 37 per cent from June 1 to June 24. But the good news is that the deficit has come down from 44 per cent last week.

The Indian Meteorolo-gical Department (IMD) has forecast that June would be deficient and rainfall activity may pick up in July, the most crucial period of sowing the Kharif crops across India.

“Conditions are favourable for further advancement of rains into Central India and Western India this week, accelerating sowing of summer crops, which was lagging due to delayed arrival of monsoon,” AK Srivastava, Director, National Climate Centre of IMD toldFC.

He said June monsoon comprises only 14-15 per cent of the four-month season, pointing out that rain deficit would be made up in July and August.

“The El Nino phenomena, associated with drought like condition in India is weakening, brightening the prospects of good rains across the country,” Srivastava said.

Monsoon was delayed by a week and thereafter its progress halted due to Cyclone VAYU. The monsoon typically covers half of India’s landmass by mid-June and the entire country by mid-July, though this pattern is slowly changing.

According to weathermen, in the last three days, the monsoon has covered the entire southern and eastern India and rains were advancing to cover Madhya Pradesh and Gujarat. Srivastava said the sowing of summer crops such as cotton, rice, soyabean, corn and pulses has accelerated now. Until June 21, farmers had planted crops on 9.1 million hectares, down from 12.5 per cent compared with last year.