- Are you holding businesses which cater to agri business? This directly affects you. eg. Aries agro, Kaveri seeds, Monsanto, Bayer. edible oil companies like Marico or Ruchi soya, partially ITC and HUL. Bad monsoon is a negative for most of these companies.
- What about fertilizers? Fertilizers will be lesser in demand during bad monsoons and probably bought lesser in the season following as farmers may not have cash in hand. examples are Chambal, nagarjuna, GSFC, Madras fertilizers, RCF, Zuari
- Sugar companies like Balrampur, bajaj hindustan, Sakthi, Triveni engg tend to fall as sugarcane is in short supply.
- FMCG and white goods companies face pressure as demand for them comes down due to lesser money flow in rural areas.
- Auto industries, jewllery and many other industries see lesser demand from rural areas in years of bad monsoons.
More than all these concerns, the short term direction of the market, may go up or down in a bad monsoon. This really depends on the world markets and other macro-economic data. Sometimes, the markets expect the bad news from monsoons to be offset by urban areas. Though the current trend is positive, watch out for the earnings in these companies. These may perform to a lesser extent compared to ones that have better earnings visibility.
The bad monsoons may result in higher inflation as the food prices would rise. The GDP growth rate also suffers as India is very much dependent on agricultural income. So, overall this is a negative for all stocks as well.
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