Monsoon expectation robust in India, farm-related stocks shine

Agriculture-related stocks continued to outperform benchmark indices and stayed high in May also on expectation of robust monsoon this year after consecutive years of drought in the past two years. Stocks such as Gujarat Narmada Valley Fertilizer & Chemical jumped 34 per cent on month-to-date basis till May 27. Others such as Super Crop Safe, Monsanto, Meghmani Organics, Simran Farms and Kilpest India also soared 25.40 per cent, 22.78 per cent, 18.44 per cent, 15.67 percent and 15.32 per cent, respectively, during the same period.

Rama Phosphates (up 51 per cent), Insecticides India ( 32 per cent) Aries Agro (up 26 per cent) which were among top gainers in the agri stocks in April gained further 8 per cent, 7 per cent and 11 per cent, respectively, in May till date.

On an average, agriculture-related stocks including fertilisers, auto -tractors, irrigation and pesticides stocks surged 5 per cent in May and 14 per cent in April. On the other hand, benchmark index BSE Sensex advanced 4 per cent and 1 per cent in May and April, respectively.

Tractor majors Escorts, VST Tillers and Mahindra & Mahindra surged 24 per cent, 27 per cent and 10 per cent, respectively, since the beginning of the ongoing financial year till May 27.

According to domestic brokerage JM Financial, a normal monsoon this year is expected to provide 20 per cent boost to the income of farmers, whose debt leverage has touched 22 per cent following two years of droughts.

“A good monsoon can provide better yields, and boost farm income by 20 per cent while the total rural income may grow at 12 per cent in FY2017 while higher rural spending by government should support non-farm income,” JM Financial said in its third annual rural survey titled Rural Safari.

On an average, farmers’ income has come down by 3 per cent in 2014-15 and by 4 per cent in 2015-16. During 2014 and 2015, monsoons were lower by 12 per cent and 14 per cent from the long period averages. The Met department had projected a 106 per cent rainfalls this year.

Vaibhav Agrawal, head of research, Angel Broking said, “Good monsoons will boost rural incomes, as a large proportion of India’s population is dependent on agriculture. Increase rural incomes would be a major positive for companies and sectors dependent on rural consumption. I am bullish on Mahindra & Mahindra and Siyaram Silk Mills.

For economy, Aasif Hirani, director, Tradebulls said, “Not only does a good monsoon increase farm production, giving more money to farmers, it also keeps inflation in check by increasing the supply of food articles. This will help in lowering interest rate which will be beneficial to the economy and our market.”

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