A normal Monsoon, with timely arrival would ensure the kharif crops get sown properly. This increases chances of improved productivity and higher sowing – resulting in possibilities of higher production.
Ajitesh Mullick
As Indian agriculture enters the most critical phase, all eyes are now on the monsoon season. Rains bring the most crucial aspect of Agricultural production, its timely arrival and departure with moderate rains in the growing regions are the determining factors.
A normal Monsoon, with timely arrival, would ensure the Kharif crops get sown properly. This increases the chances of improved productivity and higher sowing – resulting in possibilities of higher production. A higher production implies pressure on prices. On the other hand, a delayed monsoon arrival may ensure delayed and a resultant lower sowing activity for the main Kharif crops. Lower production implies higher prices for the Agri goods.
The normal date of arrival of Monsoon on Kerala coast is June 1. However, the Indian Meteorological Department (IMD) has predicted a delayed arrival of the monsoon expecting it to hit the Kerala coast on June 5. This is Bullish for the market. However, its prospects of a normal rain this year is a bearish factor. This is the reason why markets have not been able to take a very strong direction this week – despite all other factors being Bullish.
It needs to be noted that the monsoon prediction is very difficult and the monsoon activities change overtime over the next 2-3 months during its progress from Kerala towards the rest of the nation. Thus, the progress of monsoon – mainly towards the critical crop growing areas of central and North-West India remains critical in determining how the crop may be affected. Too excess or too fewer rains are bad for the crops, leading to a rise in prices.
IMD has predicted June 5 as the onset date for monsoon in Kerala. An early arrival would be bearish for the market. However, cloud formation and reports of rains in some North-Western and Southern parts of the nation could have a bearish impact on the market sentiments. Sowing for Kharif crops starts after the onset of monsoon.
The strong impact of monsoon and the rains could be well noted by the movement of Agridex. The index started on a Positive note rising nearly 4 percent in 2 days from its level of 1,000. However, as rains were noted in some parts of the country, this uptrend got limited and prices fell to that level by end of the week. Agridex, as mentioned earlier, would be helpful in determining the overall market sentiments.
Cloudy weather and prospects of rains in some parts of North-West, fentral and South India in coming weeks could well create a bearish impact on the market sentiments.
Guar would be first and the most important item to get affected by Monsoon as its sowing starts after the first showers. Lack of exports too may keep having an adverse impact on the counter even further. Chana finds strong support at these levels. Spices did recover a bit initially last week, but lack of exports keeps uptrend limited. Oil complex too failed to give any strong momentum, but firmness in International markets supported prices in India. Oil complex may trade with softened tone during the early part of the week and moderate recovery can be expected towards the weekend
We expect moderate dips during the initial half of the next week if monsoon reports turn favourable and rains get noted in the regions mentioned.
The author is VP - Retail Research at Religare Broking.
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