How good monsoon will boost FMCG, tractor makers

They say no one can time the market. But one can surely look at micro and macro economic conditions and take smart decisions. For instance, the monsoon season. The rains are expected to be normal this year. This means, smart investors will look at sectors such as FMCG, tractors, two-wheelers, and the like, which get will get a boost from the rains, notes a report published in the Economic Times today.

In fact, even though agriculture is just 14 percent of the countries gross domestic product (GDP), it plays a very important role and cannot be ignored. Because, if the rains in the last week of June and first few weeks of July are good, it can actually add as much as 50 basis points to the country’s growth rate. Adding to the good monsoons, if the central banks also cuts rates, this will be a major confidence booster for the markets as well.

“Though FMCG companies are expected to see volume growth, we prefer to stick with ITC and Jyothy Laboratories,” Madhumita Ghosh, senior vice-president (research), Unicon Financial Intermediaries, has been quoted as saying.So, you should not ignore market leaders such as ITC or a fast-growing company like Jyothi Labs.

Agriculture-related stocks are a good bet, as long as you don’t really go overboard with them. Also while investing in stocks of Urea manufacturers you should remember that profit margins of this sector is expected to get hit due to oil price increase, which happened recently. And then there are other stocks which do well due to better rural economy, are stocks for tractor manufactures. Stocks of two-wheeler manufacturers follow.

Read the entire ET story here.