InvestorQ : I understand that monsoons are very important for the Indian markets. Why is it and what impacts the stock markets in rains so much?
Abhisha Yadav made post

I understand that monsoons are very important for the Indian markets. Why is it and what impacts the stock markets in rains so much?

Answer
image
Riya Dwivedi answered.
2 years ago
Follow

One key news point that most traders and investors keep watching is the monsoon from the onset to the spread to the total quantum of rains during the year. For an economy where agriculture is the largest employer, this is a huge difference. Come summer and the next big thing for markets is the nature and colour of the Monsoon. While it is true that the share of agriculture in overall GDP has been consistently falling and losing out to services, it still remains the employer for over 50% of the Indian population. That means nearly 50% of the population’s purchasing power and the concomitant industrial demand is dependent on agriculture. With agriculture being dependent on monsoons, its importance cannot be understated.

There is another key reason for the importance of monsoon as far as Indian markets are concerned. Among the various components of inflation, food inflation tends to be the most sticky and hard to control. Food inflation is a function of the Kharif crop, which largely depends on the monsoons. We saw last year how a poor monsoon led to high prices of pulses resulting in high inflation in the second half of the year. This acts as a dampener for the RBI’s plans to cut interest rates. Let us look at some specific sectors that get impacted by monsoons.
0 Views