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Looks like another year of normal monsoon: Angel Broking

Posted On: 2018-04-16 21:54:24

Views of Mr. Mayuresh Joshi (Fund Manager, Angel Broking):

"The Indian Meteorological Department (IMD) has projected the monsoon for the year 2018 at 97% of the long term average (LTA). Normally, monsoon in the range of 96% to 104% of LTA is considered to be a normal monsoon. While monsoon above 110% of LTA is considered excessive, monsoon below 90% of LTA is classified as drought conditions. The IMD releases its first preliminary forecast in April and this is followed by another forecast in June, which gives a more realistic picture of the monsoons. In fact, the detailed estimates of monsoon distribution will be known by June by when there will be a clearer picture on El Nino.

After 2 years of drought in 2014 and 2015 India had normal monsoons in 2016 and 2017. In fact the year 2016 saw record Kharif output although 2017 saw sharp regional disparities in rainfall. Even this year the dispersion could be quite wide with the IMD projecting a 56% probability of excess rainfall and a 44% probability of deficit rainfall conditions. Every year, apart from the quantum of rains, the distribution of monsoons also matter. That is because delayed monsoons means that the sowing season is lost and the Kharif output gets negatively impacted.

The only private sector weather forecaster in India, Skymet, had earlier projected the monsoon at 99% of LTA for this year. Normal monsoons are the key to a good Kharif harvest which is essential to keep CPI inflation in check. This will also be the first Kharif sowing after the government had fixed the MSP at 150% of the cost of production in Budget 2018. Hence the impact of monsoons this year on the retail inflation would be key for the RBI to calibrate its future trajectory on repo rates."

Source: Equity Bulls

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