Views of Mr. Mitul Shah - Head of Research at Reliance Securities.
The IMD as well as the private weather forecaster Skymet announced their forecasts for the 2023 monsoon. While the IMD has forecast a normal monsoon (96% +/- 5%), Skymet has predicted below-normal rainfall (94% +/- 5%) of the Long Period Average (LPA). Both the forecasts point towards deficient rainfall, but the extent of deficiency is not as bad as was previously expected considering the El-Nino conditions.. The impact on agriculture as always would depend on the spatial and temporal distribution of rainfall over the season. Over the last few years, crop damage has occurred largely due to improper distribution of rainfall like late onset delaying sowing or less rainfall during the growth stage leading to lower yield. Late withdrawal of monsoon has also impacted the standing crop in the last few seasons. The IMD has forecast El-Nino conditions to take shape in the second half of the monsoon by which time the crops would have matured. Shift towards less water intensive crops as well as irrigation would help mitigate the impact from deficient rainfall in the 2nd half.
Impact on Markets:
Much would depend on the rainfall distribution over the months of June-September. Late onset or deficient rainfall in the middle of the season would impact crops and consequently rural incomes. This could impact sectors such as FMCG, consumer durables and auto which derive significant revenues from the rural hinterland as well as sectors directly dependent on agriculture such as agrochemicals, fertilizers and sugar. On the flip side, deficient rainfall in the 2nd half would allow construction activities to pick up pace earlier than usual benefiting the infrastructure and allied sectors such as building materials and cement. Higher temperatures due to deficient rainfall will lead to higher power demand as well as boost sales of summer products such as ACs, refrigerators, soft drinks and ice cream In the short term, the markets would closely watch for the date of onset of monsoon as well as its progress in the entire country.