Chart Beat: It's pouring, but distribution of rainfall is still a worry
The progress of the monsoon is a crucial near-term trigger for equity investors as it has a bearing on various macroeconomic parameters such as food inflation and rural demand. It also has consequences for companies in the automobile, fast-moving consumer goods (FMCG) and paints sectors, all of which have significant exposure to rural markets.
Cumulative rainfall as of 26 July was 3% above the long-term average (LTA), while weekly rainfall as of 24 July was 41% above the LTA, showed data compiled by Emkay Global Financial Services. However, the distribution of this rainfall has been uneven, with central India and the southern peninsula recording a surplus, and north, west and east India in a deficit so far.
A pick-up in the monsoon over northern India is crucial because of crop-sowing activities in the region. Usually, nearly 80% of sowing is completed by the end of July.
Inflation measured via the consumer price index rose to 5.08% year-on-year in June, from 4.75% in May, owing to high food inflation. Vegetable prices have remained elevated and sticky, with excess rainfall following extreme heat.
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