Waiting for the Rains

The Indian equity market has navigated well through the Union general elections, despite an unexpected outcome from an equity market standpoint. After consolidating for a couple of weeks, the frontline indices once again touched all-time highs. The question is how sustainable is this? The next immediate hurdle for the market is the monsoon. The rains are more than just a weather phenomenon. They play a critical role in shaping India’s economic landscape. With an economy valued at slightly over USD 3.7 trillion, India heavily relies on agriculture.

Although agriculture’s share of the GDP is only one-fifth, its ripple effect on inflation and overall rural incomes and sentiment impacts the entire economy. The success of the agricultural sector is intricately tied to the monsoon season. Favourable monsoon conditions help achieve higher output, boosting rural incomes and increasing the demand for goods and services in rural areas. Conversely, poor monsoon conditions can disrupt agricultural activities, leading to reduced demand for products like rural homes, tractors and fast-moving consumer goods, adversely impacting these sectors and economic growth.

The monsoon season may also have a role to play in the macro-economic stability of the Indian economy. Agriculture and allied products account for 50 per cent of the Consumer Price Index (CPI), meaning any fluctuations in their prices significantly affect the CPI. All the sub-sectors remain highly dependent on rainfall. And here comes the worrying factor: Cumulatively, rainfall as of June 21 was 17 per cent below the long-term average (LTA). The meteorological department has downgraded its June forecast from ‘normal’ to ‘below normal’ rainfall due to this pause in monsoon coverage.

The delayed monsoon progress has also led to persistent heat wave conditions, resulting in a lower supply of vegetables, pulses and cereals. Basin-wise reservoir levels are also in deficit and below last year’s levels, with overall levels as of June 20 being 9 per cent below the LTA and 19 per cent below last year’s levels. Reserve Bank of India Governor Shaktikanta Das expressed concerns over this, noting that the exceptionally hot summer and low reservoir levels may stress the summer crop of vegetables and fruits.

Last year, India experienced 6 per cent deficient rainfall, leading to a 10.8 per cent decline in Rabi output and a 1 per cent decline in Kharif output. Therefore, the timing, distribution and intensity of the monsoon need to be closely monitored. Any delay and unequal distribution may further put pressure on inflation and delay the much-expected rate cut.

This is a special issue and we are excited to present an analysis of the top 1,000 companies listed in India by market capitalisation. These companies represent over 90 per cent of the total market capitalisation of all the listed companies in India, ensuring comprehensive coverage of investable entities. These companies are categorised into different sectors and industries, allowing for a thorough examination of each. Our special issue features an extensive overview of 24 sectors, offering readers in-depth knowledge about the intricacies and key players within each sector.

In the next four months i.e. from end of June to September end, a total of 46 companies are slated to have their pre-listing shareholder lock-ins lifted. Roughly, this will amount to the value of around `1 lakh crore. The move may bring more supply of these shares in the market, thereby impacting their prices. While analysing a post-IPO scenario, investors often miss this. Our cover story goes into details about the performance of the recent IPOs and presents an overview of what an investor should do post-IPO to optimise the returns. Hope these narratives in this issue will help you to make the most out of your investments. Meanwhile, pray for the rains to return!

RAJESH V PADODE
Managing Director & Editor