Monsoon impact on stock markets: Here is Sensex, Nifty may react

The stock market is likely to get a boost from the India Meteorological Department (IMD) forecast on Monday of normal  monsoon for third time in a row, according to analysts. The forecast came on the day when the Central Statistical Organisation reported March WPI inflation at eight month low of 2.47%.  The BSE Sensex surged 112.78 points, or 0.33%, to close at 34305.43 on Monday, while the broader Nifty ended at 10528.35, up 47.75 points, or 0.46% higher, on WPI inflation figures. The IMD forecast came after market hours. Analysts said a good monsoon can bring a big relief to the country, both politically and economically, make a positive impact on the equity and commodity markets and reduce inflation.

IMD has forecast the southwest monsoon to be 97% of long period average (LPA) with a model error of plus-minus 5. “Markets are in an upfront mode for the last three weeks now. The report by IMD will give a positive feel to the entire market further,” said Arun Kejriwal, founder of Kejriwal Research and Investment Services. “Agri-related, FMCG and two-wheeler sectors will have an immediate effect of this report,” he said.

Between 96% and 104% of LPA is considered as normal monsoon. India received 95% of LPA rains last year with the southern part of the country only receiving normal rainfall.Skymet Weather had earlier said forecast monsoon this year to be normal at 100% of the LPA of 887 mm from June to September. More than half of the population of the country is hugely dependent on farm-based income and a normal monsoon can bring relief to the sectors related to it. Sectors like FMCG, farm-mechanism, consumer durables and agriculture will be among the top gainers in the market for this report.

“Basically 97% rainfall overall will be good for the market. Farm sectors, two and four-wheeler will see a rise. Disposable income is rising too. Stocks might react for a day or two, but it will subdue,” Kishore Ostwal, managing director at Mumbai-based CNI Research said. “About 25% crop damage done last year, might get covered up due to this,” he said. Out of 23 fertiliser stocks on NSE, eight stocks declined and 15 advanced.

 (By Ahana Chatterjee, DNA Money)