A heavy monsoon season is great news for these Indian stocks
monsoon rains will lead to better crop yields and boost rural demand.
Motorcycle manufacturers, farm-equipment makers and producers of fast-moving consumer goods have rallied following forecasts of timely and above-normal monsoon rains in 2024, after extreme and unseasonal heat wreaked havoc on Indian agriculture in the last two years. Sales volumes in rural areas are improving and several major consumer goods firms have predicted stronger business ahead.
The Nifty FMCG Index has risen 1.5% so far in May, beating the benchmark NSE Nifty 50 Index by more than two percentage points. It underperformed in each of the previous six months.
“The market is expecting a bounce back in rural demand from a good monsoon,” said Sahil Kapoor, a strategist at DSP Mutual Fund in Mumbai. If predictions of an above-average monsoon this year pan out, it will help agricultural output and support rural income, he said.
A recovery in rural stocks is also welcome news for India’s broader stock market whose stellar rally in recent years was disproportionately spurred by investment-heavy firms benefiting from the government’s higher infrastructure spending. Further, bountiful showers can aid the central bank’s efforts to cool inflation by curbing gains in food prices, thereby improving prospects for India’s economic growth and corporate earnings.
Hindustan Unilever Ltd. — seen as a bellwether for consumer appetite in India as its products are sold in every part of the country — has said it sees demand gradually improving. Rival Dabur
