Article

5 Stocks to Benefit from Good Monsoon

22 Jun 2020 Nikita Bhoota

Early monsoon is a sign of happiness for Indian equity markets. IMD predicted above-normal monsoon 102 percent long-period average (LPA) this year. The stock market usually reacts positively to normal or above average monsoon as it leads to increased farm production and increased demand from rural areas.  But, this year could be little different as Covid-19 pandemic has affected the economic activities at the global as well as domestic level. Although, the Covid19 cases are on rise but at the same time, the recovery rate is also increasing in India. Thus, this gives hope that the economy will normalise sooner or later.

Though, the Covid-19 disease has hit the performance of all the sectors in the economy. India's agriculture sector has been relatively less affected by the coronavirus pandemic. The monsoon has lot of significance as it not only improves agricultural demand but also results in employment generation, push auto sales and demand for everything like cement and steel. Thus, from the equity market perspective, tractor, two-wheeler, auto/rural financing, agrochemical and select FMCG companies will benefit from the good monsoon.

Below, we have discussed, 5 stocks that will benefit from good monsoon -

Company Name

1-Jun-20

June 19,2020

Gain/ (Loss)

Hero MotoCorp

2,327.25

2,353.50

1.1%

Coromandel International

651.25

720.8

10.7%

Hindustan Unilever

2,106.70

2,092.25

(0.7)%

Mahindra and Mahindra

461.4

499.9

8.3%

Escorts

971.6

985.05

1.4%

Source: BSE


Hero MotoCorp                    

Hero MotoCorp is India’s leading motorcycle manufacturer with ~51% share in the Indian domestic motorcycle market and ~35% share in the domestic 2W market (including scooters). Entry-level motorcycles in rural India are expected to post a faster recovery in sales post COVID-19 given good monsoon and a shift from public transportation to personal vehicles.

Coromandel International

Coromandel is the flagship company of the Murugappa Group and operates in fertilisers and other agri-input segments. It is India's second-largest producer of phosphatic fertilisers and is particularly strong in the South Indian states of Andhra Pradesh (AP) and Telangana.COVID-19 impact on company business has been marginal as it falls under essential service. IMD forecasts of normal monsoon bode well for its business.

Hindustan Unilever

Though, current macro-economic conditions are likely to keep demand subdued in the near-term However, HUL is likely to benefit in longer term as it is the largest FMCG company with one of the largest footprints in terms of products and distribution networks. Additionally, continued focus on strategy to target volume growth and decline in input costs should drive the financial performance in medium to long-term.

Mahindra and Mahindra

Mahindra & Mahindra (M&M) has significant exposure to the rural economy through its tractor division where it is market leader and commands 41.2% domestic market share as of FY20. The tractor segment to stay largely unaffected by demand side issues being faced by the rest of the automotive industry, due to stable outlook on rural incomes (on the back of good Rabi crop harvest, remunerative crop prices, healthy water table levels and expectations of a normal monsoon in 2020). The tractor segment would see a quicker revival than other automotive segments post Covid-19 and M&M will be the key beneficiary.

Escorts

Escorts is also a prominent tractor player domestically with more than 11 percent market share. With rural India relatively less impacted due to COVID-19, record food-grain procurement by government agencies as well as the expectation of normal monsoon 2020, the tractor industry is likely to outperform in coming years.

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5 Stocks to Benefit from Good Monsoon

22 Jun 2020 Nikita Bhoota

Early monsoon is a sign of happiness for Indian equity markets. IMD predicted above-normal monsoon 102 percent long-period average (LPA) this year. The stock market usually reacts positively to normal or above average monsoon as it leads to increased farm production and increased demand from rural areas.  But, this year could be little different as Covid-19 pandemic has affected the economic activities at the global as well as domestic level. Although, the Covid19 cases are on rise but at the same time, the recovery rate is also increasing in India. Thus, this gives hope that the economy will normalise sooner or later.

Though, the Covid-19 disease has hit the performance of all the sectors in the economy. India's agriculture sector has been relatively less affected by the coronavirus pandemic. The monsoon has lot of significance as it not only improves agricultural demand but also results in employment generation, push auto sales and demand for everything like cement and steel. Thus, from the equity market perspective, tractor, two-wheeler, auto/rural financing, agrochemical and select FMCG companies will benefit from the good monsoon.

Below, we have discussed, 5 stocks that will benefit from good monsoon -

Company Name

1-Jun-20

June 19,2020

Gain/ (Loss)

Hero MotoCorp

2,327.25

2,353.50

1.1%

Coromandel International

651.25

720.8

10.7%

Hindustan Unilever

2,106.70

2,092.25

(0.7)%

Mahindra and Mahindra

461.4

499.9

8.3%

Escorts

971.6

985.05

1.4%

Source: BSE


Hero MotoCorp                    

Hero MotoCorp is India’s leading motorcycle manufacturer with ~51% share in the Indian domestic motorcycle market and ~35% share in the domestic 2W market (including scooters). Entry-level motorcycles in rural India are expected to post a faster recovery in sales post COVID-19 given good monsoon and a shift from public transportation to personal vehicles.

Coromandel International

Coromandel is the flagship company of the Murugappa Group and operates in fertilisers and other agri-input segments. It is India's second-largest producer of phosphatic fertilisers and is particularly strong in the South Indian states of Andhra Pradesh (AP) and Telangana.COVID-19 impact on company business has been marginal as it falls under essential service. IMD forecasts of normal monsoon bode well for its business.

Hindustan Unilever

Though, current macro-economic conditions are likely to keep demand subdued in the near-term However, HUL is likely to benefit in longer term as it is the largest FMCG company with one of the largest footprints in terms of products and distribution networks. Additionally, continued focus on strategy to target volume growth and decline in input costs should drive the financial performance in medium to long-term.

Mahindra and Mahindra

Mahindra & Mahindra (M&M) has significant exposure to the rural economy through its tractor division where it is market leader and commands 41.2% domestic market share as of FY20. The tractor segment to stay largely unaffected by demand side issues being faced by the rest of the automotive industry, due to stable outlook on rural incomes (on the back of good Rabi crop harvest, remunerative crop prices, healthy water table levels and expectations of a normal monsoon in 2020). The tractor segment would see a quicker revival than other automotive segments post Covid-19 and M&M will be the key beneficiary.

Escorts

Escorts is also a prominent tractor player domestically with more than 11 percent market share. With rural India relatively less impacted due to COVID-19, record food-grain procurement by government agencies as well as the expectation of normal monsoon 2020, the tractor industry is likely to outperform in coming years.