The southwest monsoon hit Kerala on Tuesday, ahead of schedule, raising the prospect of a good monsoon and a bumper harvest for the second straight year. It also burnished the domestic consumption story with stocks in FMCG, two-wheelers, fertiliser and tractors seeing renewed interest from investors and analysts.
As the south west monsoon made landfall it coincided with all-new milestones on the bourses — the Sensex at 31,159.40 and Nifty at 9,624.55 soared to new highs. Tied to this story is the hope of increased rural spending ability and consequent rise in demand that will help earnings growth of FMCG, consumer durables, agri inputs, fertiliser and cement companies, apart from tractors and two-wheelers, the latter hit by the demonetisation drive. Tractor and farm equipment major M&M said, “The outlook for 2017-18 is much more robust with a favourable domestic and global backdrop. The monsoon forecast is normal for the second consecutive year which bodes very well for demand recovery.”
Vijay Singhania, founder, Trade Smart Online, said, “News of a timely arrival of the monsoon and projection of normal rainfall this year have already brought added optimism in the last few trading sessions. In fact, benchmark indices are trading at all-time high levels and have started factoring in this development.” The BSE FMCG index is trading at 41.51 times the expected earnings for 2017-18, compared to a five-year average of 43.62 times, while the BSE consumer durables index and BSE consumer discretionary goods and services index are trading at 57.70 times and 35.80 times the expected earnings for 2017-18, respectively.
