Moneycontrol PRO
UPCOMING EVENT:Attend Traders Carnival Live. 3 days 12 sessions at Rs.1199/-, exclusive for Moneycontrol Pro subscribers. Prices Increasing Soon. Register now!

Healthy monsoon to put economy back on track, these 10 stocks likely to grow significantly

Various segments of equities related to agriculture and rural spending are expected to see huge growth in the monsoon season.

May 25, 2021 / 02:28 PM IST
Representative image

Representative image

 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

India has been facing numerous calamities for the past couple of months that have hampered economic growth and recovery. The recent addition to the ongoing second coronavirus wave is the Cyclone Tauktae and black fungus. While all these cataclysms keep the table busy, the promise of a good monsoon is a ray of hope.

The Indian Meteorological Department (IMD) recently said the southwest monsoon rain is expected to be normal this year, with the long-period average (LPA) at 98 percent. A good monsoon will mean a third consecutive year of bumper production and a cascading positive impact on the economy battered by COVID-19. Supporting the IMD prediction, private weather forecasting agency Skymet has also said the monsoon will be normal at 103 percent of the LPA.

The southwest monsoon plays a significant role in India's agriculture, accounting for 70-75 percent of the annual rainfall. The agriculture sector contributes around 15-17 percent to the GDP but directly or indirectly, it accounts for 55-60 percent of jobs, which has a significant impact on the demand outlook.

The monsoon clouds and D-Street movement complement each other. The focus, however, is on how the monsoon will impact some sectors and it is important for investors to have the right strategy taking into account the coronavirus pandemic as well. As a good monsoon is directly proportional to uplifting rural spending, many industries are likely to see a rise in demand for products as well as services.

Various segments of equities are expected to grow drastically near the monsoon season. First are the fertiliser companies, whose sales usually soar amid a rise in demand from the rural areas. We have already seen record production from some known fertiliser companies in the recent past, indicating higher sales activity. Companies like Coromandel InternationalNational Fertilizers, and Bayer CropScience could be prima from the segment.

Close

With the improvement in rural sentiment, sales of two-wheelers and low-cost three as well as four-wheelers are expected to improve. Even tractor sales are expected to increase, tracking demand for cultivation. However, sales in urban areas may get affected due to the industrial slowdown amid the COVID-19 pandemic. Hence, companies like EscortsM&MHero MotoCorp, and TVS Motor can be seen as an investment opportunity.

One of the most lucrative industries would be the FMCG, as a higher purchasing power of rural India will increase the demand for their products. This is likely to improve the financial performance as the rise in margins and net sales gradually improve. If this is the case, then stocks like Colgate PalmoliveDabur India, and Hindustan Unilever are likely to see improved valuation.

Indian equity markets will closely track how the economy digests the slowdown caused due by the pandemic and how economic activities come back to the pre-COVID levels. At the same time, market participants need to watch how the government is preparing for a possible third wave and to bring the economy back on track.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Osho Krishan

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark