We all know that in India the monsoon season arrives during the month of June or July. It usually remains for four months, i.e. up to September. We often read in newspapers and see in the TV news that low monsoon is always followed by rise in the prices of several commodities. For those who do not know, monsoon also determines the ups and downs of the stock market. The impact of the monsoon can be seen every year on the NSE Stock Market.
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Understanding the effect of the Monsoon on NSE
There are many companies that study the impact the monsoon has on the NSE stock market every year. It is important to mention that Agriculture is the main strength of India’s economy. The performance of agriculture certainly matters in determining how healthy the stock market would be. For this reason, if the monsoon turns out to be below expectations, then it certainly hits the economy of India in a negative way. As a result, it also affects the health of NSE Stock Market.
But, why agriculture is such a vital aspect of India’s economy. Like we know, almost 60 percent of India’s entire popular still relies on the agricultural sector when it comes to earn their living. From farmers to pesticide sellers, there are many ways in which people are associated to the agricultural sector in India. Hence, when India receives less rainfall in a year then it obviously affects the production of food grains. The distribution of seasonal rainfall across India really matters in this regard, because 75 percent of water requirement is met through rain water.
Why Monsoon is Important for Growth of Stock Market in India
When India receives insufficient rainfall in a year, then it leads to crop failure. It also leads to a situation where sowing gets delayed, which in turn affects the production of important if crops, such as pulses, rice, cotton, and oil seeds. So, when the output of such crops’ production remains lower than the normal amount, because of less rainfall, then it hits the GDP of the country. In fact, deficient in rainfall also affects the production of soybeans, millet, sugarcane, etc. When the GDP gets affected then it creates a sense of ‘lack of confidence’ among the investors in the market. This is how the NSE stock market gets affected.
The production of food crops matters
There are many companies and industries that are directly or indirectly related to the agricultural sector, such as pesticides, edible oil, jute, etc. So, when their performance remains on the low side, investors hesitate to invest their money on such companies’ stocks. One more factor that affects the GPD of India in a positive way is the gain of foreign currency.
When food items like pulses are produced in surplus amount then Indian government exports the surplus amount to other nations. In this way, our country earns foreign currency. This factor also affects the performance of the NSE stock market in a positive way. So, those were some of the reasons that explain why monsoon is related to the health of NSE stock exchange in India.