IMD Predicted Above Normal Monsoon; How It May Impact Share Market?

The Indian Meteorological Department (IMD) forecasted on Monday, April 15, 2024, that India is likely to receive above-average Monsoon rain in 2024. The Monsoon rains are seen at 106% of the long-term average in 2024.

La Nina weather conditions are seen developing during the second phase of Monsoon this year. “La Nina conditions, associated with a good Monsoon in India, are likely to set by August - September” IMD said.

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Monsoon Impact on Share Market

 As we know, India is an agricultural economy that contributes 20% to the country's GDP. Moreover, the agricultural sector provides employment to a large part of the population, and the majority of the farmers are still dependent on the Monsoon. 

Every year, IMD releases its Monsoon forecast, which is an essential barometer for investors to understand how commodity prices may fluctuate in the future. If the Monsoon was good, then crop demand and supply would be properly balanced. This helps to keep inflation under control and brings steady growth in sales for many companies. 

However, if the Monsoon is low, it may disturb crop production and supply. This may lead to a rise in inflation, which may impact the profit margin of many companies. 

IMD: Monsoon Past Prediction

Earlier in 2023, IMD's forecast had been off by 7% in the last 10 years. In 2023, the rainfall across India as a whole during the Monsoon was 94% of its long-period average. On May 15, IMD had predicted that the Monsoon would set in Kerala on June 4, but the actual Monsoon was on June 8.

In 2023, It also predicted that El Nino would have no impact in the first half and could aggressively impact in the second half. Later, this prediction was found to be correct. 

The historical data for the years 1951 to 2023 shows that India has experienced above-normal Monsoon rainfall on nine occasions. 

The more than average normal Monsoon rainfall is likely to hit many parts of the country. Expect some areas of northwest, east and northeastern India where below-normal rainfall is most likely. 

IMD predicted Himachal Pradesh and Uttarakhand are expected to receive below normal rainfall.

What Skymet Predicted?

A Private weather forecasting agency named Skymet recently said that it expects India to see a normal Monsoon between June and September 2024. Skymet said, Monsoon rains are expected to be 102% of the long period average of 868.6 m for the fourth month period. 

Monsoon forecast is an essential parameter for policymakers, which impacts inflation rates. A normal Monsoon is favourable for the more controlled inflation, but a poor Monsoon may decrease the speed of GDP growth which indirectly impacts the share market. 

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