Skymet Weather on April 3 predicted that monsoon rains will be below normal this year, but market experts feel that it is still a developing phenomenon and nothing is certain as off now, but if someone wants to play the agri-theme then Coromandel International, UPL, and PI Industries are top bets.
Monsoon is considered normal when the LPA (long period average of rainfall) is between 96 percent and 104 percent. This year, it is expected to be 93 percent.
The reason behind a deficient monsoon will be the developing El Nino phenomenon, which means a rise in temperature in the equatorial Pacific Ocean.
This is the first indication of the kind of rainfall that can be expected during the monsoon season. El Nino brings suppressed rainfalls in India, while its opposite is La Nina, which brings ample showers.
Reacting to the news, HSBC in a report said that El Nino is the spoilsport, but a devolving one. The month of June looks to be most affected, followed by improvement, said the report.
Lower rain in June could delay sowing, but any significant revival in rainfall from July could lead to recovery as well. HSBC likes UPL and PI Industries which would be least impacted.
Globally, demand revival across Latin America (LATAM) bodes well for global players while Europe is facing issues stemming from drought, suggest experts.
Growth visibility across different geographies is expected to benefit players with a global presence, they say.
In the domestic market, with moderation in crop prices (more prominent in fruit and vegetables), lower paddy sowing and an erratic and untimely monsoon are likely to keep the consumption of agri inputs under pressure.
“In the near term, we expect government support (direct income transfers, farm loan waivers) to drive farmers’ income. Our top picks are PI Industries and Coromandel International,” Edelweiss Securities said in a report.
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