Stock Market Performance in the Monsoons
Most of us welcome the rains with both hands. It is indeed a refreshing feeling to have raindrops fall over us. However, have you ever wondered what will be the economy during the monsoons?
Monsoons are the major sources of water in this world where water scarcity is a growing concern. All farmers and those in the agricultural field await the monsoons and if it turns out to be a dry year, then their lives are at stake.
However, in the metropolitan cities, rains can be chaotic. It brings life to a complete halt. Metros, trains, and flights are either delayed or canceled. Traffic on the road increases and everyone is late for everything. In low-lying areas, water is logged and some of the big cities fall prey to floods with just one day of incessant rains. Although schools remain shut and are a joy for school going students, it disrupts the routine of regular office goers whose salary is cut if they come in late or take a leave. In short, such places do not really welcome rains with a whole heart.
Therefore, it is almost as if there are two sides to the monsoon weather. While some companies are expected to perform well during the monsoons, others do not do so well during the monsoons, which in turn affect the stock market value as well. It is a bit of both, part actual and part psychological.
Here is a look at how monsoons really affect the economy and the stock markets.
- A good monsoon has the potential of bringing in some of the best tidings for a few companies, as monsoons tend to improve the demand for certain everyday products, especially in the rural areas. Therefore, the FMCG companies are expected to perform well.
- Moreover, with a good monsoon, the low-cost cars and agricultural-friendly vehicles such as the tractors are in demand because of the high demand in the farming sector. Therefore, the automobile industry is also expected to perform fairly well.
- Additionally, good monsoons mean that there will be an increased production of farm produces, which in turn will lower the cost of raw materials. Hence, the manufacturing companies are also expected to do well.
- Further, better rainfall will boost the sales of companies that are dependent on agricultural output. Thus, even the irrigation and fertilizer companies are expected to do well.
- However, there are certain sectors that are affected due to monsoons and this includes the hotels and tourism. Thus, the market here experiences a high risk.
Therefore, an additional to-do element that you need to include while investing in stocks is to do a “rain check” in the literal sense.