Monsoon forecast lifts up mood: As agri shines, will it rain returns for these stocks?

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Published: April 5, 2018 11:48:12 AM

After private weather forecaster Skymet on Wednesday predicted normal monsoons In India, research firm HSBC says that it will provide a boost to the agricultural sector. We take a look at top stock bets.

Rain stocks: Top stocks to buy given good monsoon!UPL, BayerCropScience and Dhanuka Agritech remain our top picks, HSBC said in a report. (Image: Reuters)

After private weather forecaster Skymet on Wednesday predicted normal monsoons In India, research firm HSBC says that it will provide a boost to the agricultural sector. Interestingly, Skymet has forecast a a 20% chance of above normal monsoon, and a 5% probability of excess rain in 2018-19. HSBC notes that the agriculture sector is slated to benefit from it, as 70% of the total rainfall is attributable to the monsoon season.

In an interview to ET Now, Deepak Shenoy, founder of Capital Mind, said that when the monsoon numbers have an important bearing  on most two-wheeler sales expectations. “We will wait for the later half of this month and get a better idea. We want to be long on two-wheeler players, especially anyone getting into the electric space,” Deepak Shenoy told ET Now.

So which stocks is HSBC betting on? UPL, BayerCropScience and Dhanuka Agritech remain our top picks, the firm said in a report. UPL shares were trading at Rs 756.75, up by more than 2% on BSE this morning. Dhanuka Agritech shares were trading at Rs 594, up by nearly 1%.

Brokerage firm Prabhudas Lilladher sees FMCG behemoth HUL, Hero MotoCorp in bikes or LG or Samsung to benefit from a combination of good monsoon, higher crop prices, farmer loan waiver in a few states and financial inclusion led by Jan Dhan accounts, as rural India gears up to spend more on housing, consumer goods two-wheelers.

The Indian government will be counting on above normal monsoons to achieve greater economic growth ahead of the general elections in 2019. Last month, Finance Minister Arun Jaitley said that the Indian economy could achieve an 8 percent-plus growth if if the monsoon rains turn out to be normal this year and crude oil prices stay within manageable limits. Prior to Budget 2018, the economic survey had pinpointed agriculture as one of the major focus areas for Indian economy this year.

Notably, 55% of the country’s overall agricultural land is rain-fed; and the monsoons will have a bearing on key kharif (summer) crop output. Further, distribution of rainfall across regions, sown area, temperature during harvest, etc, also play their respective parts on agricultural output.

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