Monsoon arrives early in India, sets over Kerala; which sectors will benefit?

Southwest Monsoon, the rain-laden winds that account for the bulk of annual rainfall in India, has marked an early arrival. The winds set in over Kerala, the first stop of monsoon in mainland India, on Thursday.

India Meteorological Department (IMD), the country’s official weather forecasting agency, took to social platform X to confirm the arrival of monsoon. "Southwest Monsoon has set in over Kerala and advanced into most parts of Northeast India today, the 30th May, 2024," it posted.

Monsoon’s arrival in Kerala is two days ahead of the normal arrival date of June 1. The rain-laden winds will progress towards Karnataka, Tamil Nadu, Goa and other parts of peninsular India, before reaching the western state of Maharashtra.

Mumbai, which has been reeling under hotter-than-usual weather combined with extreme humidity, is expected to receive the monsoon winds on June 10-11, as per the last forecast issued by the IMD.

Which economic sectors will benefit due to monsoon?

The Indian economy, despite the strides made in industrial and technological progress, is still largely driven by agriculture. With the world’s largest arable land area, a strong agricultural output remains crucial for India's gross domestic production (GDP) to grow at a steady pace.

The farming sector is relieved by the IMD’s forecast of above-normal rainfall between June and September. The weather body predicts the pan-India average of rainfall to be 106% of the long period average.

The strong rainfall would provide an impetus to cultivation, which in turn would generate jobs in the rural economy for farm labourers, experts pointed out. A solid production of foodgrains would keep food inflation in check, they added.

Increased cultivation would also lead to the demand of tractors, which in turn would boost the revenues of automobile companies.

A strong agricultural output is expected to boost rural income, and this would lead to a surge in consumer expenditure. The fast moving consumer goods (FMCG) industry is among the firsts to benefit in case of a strong rural consumption, analysts said.

Chemical companies selling fertilisers are also set to benefit from the uptick in farming activity that will be triggered by the arrival of monsoon.

Sectors in focus

In the stock market, sectors such as automobiles, FMCG and chemicals are expected to log gains due to the arrival of monsoon. The surge will be attributed to the boost in agricultural activity, which in turn would lead to higher sales for these companies.

Nifty Auto has already been treading higher this year, climbing by 26.4% this year. It is presently hovering around 23,507.

However, Nifty FMCG has edged lower in 2024 so far. The index is currently at around 54,974, down 4.3% since the start of this year.

Monsoon also holds the potential to spur investment, as strong rainfall will boost rural demand, which in turn will power the country’s GDP growth. A solid GDP in the coming quarters could make long-term investors more bullish on India, analysts pointed out.