As market wakes up to Brexit hangover, moody monsoon may spoil plans for the week

As we entered a fresh trading day, following a tumultuous Friday last week, the sentiment on the Dalal Street still appears bearish. While Brexit fears may have receded, with many analysts believing the domestic market stands tall as compared to other emerging market peers, the challenges at home such as delayed monsoon or dilly-dallying on GST bill may play spoilsport, going ahead.

"We remain confident on India's equity story. The only risk is any possible failure of monsoon. If monsoon is good, India would outperform many major equity markets of the world once again," said G Chokkalingam, founder, Equinomics Research & Advisory.

But, will the monsoon turn out to be good, as expected?

The monsoon rains have remained 15 per cent lower than average in June on account of one-week delay on the arrival. Though, Indian Meteorological Department expects the deficit to narrow in the days to come as rains are likely to end in the country later than usual this year, it would leave the soil moist for the sowing of winter crops such as rapeseed, wheat and lentils.

Monsoon rains are significant for an agriculture-dependent economy like India. A week's delay in their onset this year has caused the planting of summer-sown crops such as cotton, rice, soybean and sugar cane to drop by nearly 24 per cent.

Monsoon rains typically arrive at the southern coast of Kerala state by June 1 and start retreating by September from the western state of Rajasthan.

If rains don't pick up pace in the days to come, this will mark the third consecutive year of below average monsoon denting the prospects of improving corporate earnings next quarter onwards on rural demand.

It is to be noted, however, that even if monsoon plays out well, the kharif harvest money will be with the farmers only towards the end of this year. Therefore, the demand resulting into profit growth will only reflect post December quarter, said an expert.

Monsoon related stocks

Two-wheeler stocks such as Bajaj Auto, Hero Moto and M&M Finance
 
Dhanuka Agri, Rallis India, Bayer Crop

Mahindra & Mahindra Fin Services

ITC