Monsoon Update - Weak start for Southwest Monsoon - Emkay

Economy Update

Weak start for Southwest Monsoon

The Southwest Monsoon starts on a weak note with cumulative rainfall for the season till June 13, 2012 being just 29mm, 42.3% below normal. 30 divisions out of total 36 divisions reported deficient/ scanty rainfall for the week. The total rainfall for the season till date is just 3.3% of the normal rainfall (Exhibit 7) for the full season compared with 7.1% for the corresponding period last year. Key thing to note here is that the weak monsoon has been followed by deficient pre monsoon rains, which has been 30% less than LPA. Historical evidence suggests that whenever there has been a deficient pre monsoon rains, the southwest monsoon has also been weaker most of the times.

Lower rains in key agri states to delay sowing

While cumulative rainfall for the season till date remains significantly below normal at -42.3%, deficient rainfall (57-60% below normal) in key agri states like Gujarat, Maharashtra and Andhra Pradesh could delay sowing. For the week ended June 13, 2012, cumulative rainfall in rain dependent/ Adequately rain fed/ well irrigated areas was 68%/24%/ 87% below normal respectively.

Pre monsoon rains lower by 25%yoy and 30% less than LPA..

While the winter rains (Jan & Feb) has been 2.4% more than last year, pre monsoon rains (March, April & May) have been 25% less than last year and 30% below the long period average. Resultantly, cumulative rainfall from Jan to May 2012 has been lower at 134mm (-17%yoy) as against 161 measured in the corresponding period last year.

Resulting in lower reservoir levels at 18% of their FRL's vs 24% last year..

Driven by lower pre monsoon rains, the reservoir levels stand lower at 18% of their full reservoir level (FRL) as against 24% for the corresponding period last year. However was higher than its long period average of 15%.

Current storage down 25%, below normal monsoon could aggravate issues

Total live storage of the 84 major reservoirs across different parts of the country, stands lower at 27.2 billion cubic meters (bcm) (or 18% of the storage capacity at Full Reservoir Level). At the current levels, storage is lower than the last year's position by 25%, and in the event of a below normal monsoon, Rabi production could also get impacted.

IMD's preliminary forecast predicts normal rainfall this year

As per India Meteorological Department (IMD), southwest monsoon rainfall for the country as a whole is likely to be Normal (96-104% of Long Period Average (LPA) with 47% probability. The probability (24%) of season rainfall to be below normal (90-96% of LPA) is also higher than its climatologically value. However, the probability of season rainfall to be deficient (<90% of LPA) or excess (>110% of LPA) is relatively low (<10%). For the week ending 20th June 2012, IMD forecast increase in rainfall activity over Andhra Pradesh, eastern states & adjoining central India and East Uttar Pradesh.

RBI leaves the Repo, CRR unchanged

As expected , The Reserve Bank of India (RBI), in its Mid quarter Monetary Policy Review has kept the Repo rate unchanged at 8%. But despite comments from leading bankers, it has also kept Cash Reserve Ratio (CRR) unchanged at 4.75%. However, the Central Bank has agreed to continue with open market operations. This time RBI has given more weight towards rising inflation rather than week growth momentum.

Source : Equity Bulls

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