5 Best Rural-Focused Stocks to Buy in Monsoon 2022

Continuing the good rainfall of the previous three years, the Indian Meteorological Department (IMD) has predicted that the monsoons will be “above normal” this year, 2022-23, with a fair distribution across the country. When the monsoons are ‘normal or above-average,’ the stock market normally reacts positively since it means more farm produce and demand from rural areas. However, the Covid-19 epidemic has had an impact on global and domestic economic activities in the last two years. Although Covid-19 cases continue to be reported in India, the recovery rate is improving as a result of successful vaccination initiatives. As a result, there is reason to believe that the economy will return to normal sooner or later. The monsoon is significant because it not only boosts agricultural demand but also creates jobs, boosts auto sales, and increases demand for everything from cement to steel. Tractor, two-wheeler, auto/rural lending, agrochemical, and select FMCG businesses will benefit from the favourable monsoon, according to the equities market.

Why Monsoons are Very Important to India and the Economy?

• Two-thirds of Indians rely on farm income, and over 40% of our planted land is irrigated only by rain.
• Summer crops, which are dependent on the monsoon, account for half of India’s farm output. Rains must be not only plentiful but also evenly distributed among states to maximise farm output.
• The monsoon also replenishes 81 water reservoirs that are monitored nationally and are used for drinking, power, and irrigation.
• Good monsoons will result in increased farm output, which will boost rural India’s purchasing power. This will increase demand for practically everything, which will benefit the economy as a whole.
• Normal rains function as a powerful curb on food inflation by increasing food output and availability, lowering food inflation in the country and allowing the RBI to lower the key interest rates.
• A healthy monsoon boosts rural earnings, which boosts demand for manufactured goods and improves the economy.

Stocks to Buy for Long Term on Good Monsoon Predictions

The monsoons are crucial to India’s economy. Good monsoon –> Prosperous farmers –> Farmers have more purchasing power. It indicates that favourable monsoons improve rural India’s purchasing power, and individuals from villages will buy things, resulting in increased demand for particular enterprises and, as a result, an increase in the total market index.

PI Industries

In India, PI is a prominent Agri Input and Custom Synthesis & Manufacturing firm. Pesticides and insecticides are manufactured by P I Industries. The company’s Chairman is Piyush Singhal, while the Managing Director is Salil Singhal. The manufacturing plant is in the Rajasthani city of Udaipur. Minerals, measuring, and allied goods are among the company’s other divisions. A good monsoon is favourable for pesticide and insecticide manufacturers, which are important farm inputs. Pesticides and insecticides will be in high demand throughout the coming rainy season, making PI Industries a smart choice in this area.

Hero Motocorp

Because of the increased farm output, good monsoons would result in additional cash in the hands of rural consumers, which will enhance automotive sales. The 2-wheeler segment would be the first to be affected, with Hero Motocorp being the top choice for rural consumers. Hero Motocorp also has an edge because of the cheaper fuel prices. If the monsoons come in on schedule, this script might see double-digit growth.

UPL Ltd

Crop protection products, intermediates, speciality chemicals, and other industrial chemicals are manufactured and sold by United Phosphorus Limited (UPL). Insecticides, fungicides, herbicides, and fumigants are among the items offered by the company, which has built a broad product line to meet a plant’s crop protection needs at all phases of development. Strong financial condition, market dominance, and predicted high demand for items due to favourable monsoon forecasts would boost the script’s value in the next few days.

Swaraj Engines

Swaraj Engines is an excellent stock for even the most cautious investor. It boasts a strong management team with outstanding credentials (Mahindra-Kirloskar), a good return on investment (ROI) of 24%, is debt-free and pays a high dividend yield (4%). If the monsoons are good, there will be a lot of demand for tractors, and Swaraj Engines will be one of the first to respond. Swaraj Tractors used to have an 8% market share in FY08, but that number has recently risen to 16%. As a result of the good monsoons, it has gained one of the largest market share gains. A great long-term investment option.

HUL

Rain and the fortunes of the FMCG sector are inextricably linked. The FMCG sector is displaying dismal results and is available at reasonable rates due to the bad monsoons that have been prevalent for the past two years. If any good factor contributes to this sector’s double-digit growth, it will be beneficial. Because the IMD predicts above-average rainfall this year, FMCG sales will increase. In this industry, Hindustan Unilever (HUL) is my top pick, as it is expected to expand sales by 15% to 20% in the coming excellent monsoon years.

Final Thoughts

Aside from the good monsoons, the national government is working hard to revitalise the rural economy. The government has taken several steps to increase consumption, infrastructure, and job prospects in India’s rural areas. All of these variables will enhance demand for the aforementioned products, allowing rural India to increase farm output, hence increasing sales of these rural-focused enterprises’ products. A successful monsoon is crucial to the revival of the Indian economy.