Monsoon Basket 2024: Motilal Oswal suggests to bet on these stocks for short term gains

The country’s meteorological department IMD had forecast an above average monsoon (106 per cent of long-term average) this year, indicating likely development of La Niña conditions during the second half of the monsoon season. Considering that a normal monsoon will help drive rural demand and benefit sectors  like agrochemicals, fertilizers, tractors and FMCG, domestic brokerage Motilal Oswal Financial Services (MOFSL) in its recent report dated June 8 has listed some five stocks which are seen to benefit from a good monsoon that it termed as Monsoon Basket 2024.

The brokerage has advised investors to bet on this basket from a short term perspective i.e. 3-6 months and for a potential upside of 20 per cent.

Here is the list of the stocks forming the Monsoon Basket 2024 together with the rationale:

Cholamandalam Investment and Finance Company

The brokerage states that the company is  equipped to deliver strong AUM growth with benign credit costs, translating into a sustainable RoE of around 21-22 per cent across economic cycles. It is also planning RoA expansion in newer businesses by maintaining higher productivity and improving opex ratios

Dabur

The company has won the remarkable feat of becoming a leader in the oral care segment across Odisha, Karnataka and Andhra Pradesh, reflecting the company‘s strong market presence. Its well- managed volume trajectory and effective price adjustment have contributed to revenue growth. The company’s international business has demonstrated impressive double digit growth. Dabur expanded its rural coverage, this positions the company advantageously as a leader in reaching rural consumers, a segment with significant growth potential. 

Escorts

Kubota’s parentage would help Escorts improve its competitive positioning, Furthermore, the brokerage expects the company’s Railway business to deliver a ~19% CAGR over FY24-26, benefitting from the ramp-up in new products by FY25. 

Coromandel International

The operating performance of the crop protection business is likely to improve from 1QFY25. Newer businesses such as Specialty Nutrition Division (SND), bio-products and retail stores business are expected to grow ~10-15% going forward. Further, profitability of these businesses is also likely to improve over time. 

Emami

The company is optimistic about future growth, supported by a favorable economic landscape, a forecast of a normal monsoon, anticipated rural market recovery, and government initiatives. The company has witnessed signs of market recovery with the rural segment gradually bouncing back. The company anticipates a moderate price increase for FY25, limiting it to a range of 2-2.5%. MOFSL expects volume growth acceleration in FY25, driven by rural growth improvement and seasonal tailwinds.

For each of these stocks, the domestic brokerage has assigned a 20 per cent weightage.