If mood at the Dalal Street on Friday and then on Monday is to go by, the below normal monsoon in India could present the first major hurdle for the incumbent government post Lok Sabha Elections.
After losing 188.47 points on Friday, the Bombay Stock Exchange sensex fell over 56.46 points on Monday as funds and retail investors indulged in booking profits at prevailing levels amid forecast of below normal monsoon this year.
Brokers are of the view that the current selling spree is mostly of a profit-booking nature, by participants at current levels amid forecast of below normal monsoon this year, which is influencing the traders sentiments at the moment.
"We believe it would be premature to factor in weak agriculture production and maintain agriculture gross domestic product (GDP) growth estimate at 3.3%. But if El Nino conditions are fully factored in, the agriculture GDP growth may be lower by 250-300 basis points (bps), and the average retail inflation may be 100 bps higher", said a report published in the Livemint Website that quoted Kotal Institutional Equities.
In the report, the Kotal Institutional Equities further said that India experienced the impact of El Nino conditions in FY2010 with agriculture GDP registering 1% growth. They maintained that agriculture GDP growth of 3.3%; worst-case scenario: 0.3-0.7% growth. With most of the production critically dependent on July-August rainfall, we maintain our FY2015 agriculture GDP growth estimate at 3.3% for now.
The Kotal Institutional Equities cautioned that if they were to factor in weak monsoons (similar to FY2010) then it is likely that:
A. For FY2015, the overall GDP growth estimate would be lower by 40-50 bps (current estimate: 5.1%).
B. Agricultural GDP growth estimate would be lower by 250-300 bps (current estimate: 3.3%).
C. The average consumer price index (CPI) inflation would increase 100 bps (current estimate: 7.6%).
Photograph by ILRI
By: Skymetweather.com
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