The Hindu Business Line : `Monsoon delay may hit rural markets'

WHILE the truant behaviour of the southwest monsoon is expected to inevitably result in a setback to kharif crop prospects, a significant negative impact on the incipient industrial and economic recovery is seen emerging.

According to Mr K. Ramachandran, Head of Research, Tata TD Waterhouse Securities, it was expected that yet another year of normal monsoon would lead to the third bumper harvest on a trot and the resultant growth in rural incomes would lend impetus to demand and consumer spending.

The rural markets were limping back to recovery on the back of a relatively good kharif crop in 2001, after the disastrous kharif season in 1999 and 2000. About 70 per cent of the population resides in rural India and many industries have substantial exposure to the rural markets.

``All such expectations of a rebound are likely to take a beating following the indifferent progress of monsoon,'' Mr Ramachandran asserted, adding that FMCG, two-wheelers, cement, consumer durables and commercial vehicles sectors were warming up to prospects of renewed buoyancy after a long phase of sluggishness, but the hopes are likely to be belied.

Based on the expectations of industrial recovery, driven by buoyant rural demand, cyclical and FMCG stocks had firmed up in the last few weeks. The disappointing performance of monsoon can upset these calculations, the expert pointed out.

Predictably, equities retreated sharply with the Sensex shedding 50 points on Tuesday. The fall was led by heavyweights, Hindustan Lever (2 per cent), Reliance Industries (3 per cent), SBI (2 per cent) and Infosys (3 per cent).

The unexpected turn of events on the monsoon front could, however, bring back into limelight the software sector stocks, which are substantially immune to the monsoon factor, Mr Ramachandran said.

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