This year's low rainfall is estimated. By Wednesday, the rain was 37 percent lower than its long-term average. But analysts are not worried over this matter. He believes that the effect of less rain will not be so high that the Reserve Bank of India (RBI) has to reduce interest rates in August.
However, due to weakness in rural areas, pressure on sectors related to consumption may be seen. If the government does not announce any relief in the upcoming budget, such a situation can come. Usually, by the middle of June, the monsoon reaches two-thirds of the country. On June 25 this year, it reached only half the count.
The sowing of kharif crops is a decline of 12.5 percent compared to year-on-year. This year's rainfall deficit has also gone up from 38 percent to 45 percent. In India, half of the foodgrain production and 5 percent of the GPD comes from Kharif crops.
Kharif crop depends mainly on the monsoon. Good crop brings prosperity to the rural areas. This increases rural income and increases expenditure. However, brokerage firm UBS believes that good rainfall does not necessarily increase rural income.
According to the Australian Meteorological Department, the impact of El Niño on the monsoon has reduced in India. Due to positive change in the Indian Ocean, monsoon will get support. UBS said, "If the monsoon rises fast, it will have a positive impact on the consumer-related sector and the entire market."
The brokerage has expressed its hope that Nifty will reach 12,000 by the end of December. It said that the relationship between monsoon and inflation has been weak in recent times. Improvement in supply chain has improved domestic and global supply.
The Consumer Price Index (CPI) or inflation rate is 46 per cent of the consumption of food items. But there is only 22 per cent impact on monsoon directly on the CPI. Analysts believe that the government has a large stock of foodgrains. Storage of wheat and rice is up to 4 times.
Emphasis will be on the rural situation
In the rural areas, there is a sluggish challenge in demand. According to Goldman Sachs, January-March quarter was the first time in the last 10 years, when revenues growth of 17 companies on its radar decreased. The brokerage believes that this trend will continue for the next two quarters because it will take time to show the effect of official steps.
Prabhudas Liladhar said that in the coming 5 to 6 days the rain can reach many corners of the country. This will help to increase crop sowing and agricultural production. However, it has to be seen how the monsoon moves forward. It must also be seen how much rain is received in the next three months. It will also be important for Agrochem companies.
Centrum Broking has expressed hope of providing relief from the government to rural India. Trading Bells co-founder and COO Partha Nyati said that FMCG shares can benefit from lower revenues in rural earnings, while more improvement will benefit auto companies.
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