How Does Stock Market Performance Affected by Monsoon?

Impact of Monsoon on Stock Market

Different factors affect the performance of the stock markets. The factors can be broadly classified as may be political, economic, financial or even weather that can affect the stock market performance. The article discusses the effect of monsoon on stock market performance.

How Weather Affect the Stock Market Performance?

India is a mixed economy….comprising of agriculture manufacturing services, etc.  Agriculture is a major constituent of our GDP that’s why India is called a KRISHI PRADHAN DESH. A very large population of India depends on the agriculture sector.  But there are many constraints for agrarians.

One such constraint is the availability of irrigation water. Most of the farmers, particularly the small farmers, depend solely on monsoon for agriculture and irrigation. Hence monsoon becomes the vital need for water resource for the farmers.

How Weather Affect the Stock Market Performance

Sometimes rainfall is not evenly spread in different geographies in India. Some area experiences heavy rainfall that leads to floods. Contrary to some regions experience short of rainfall that leads to drought or drought-like condition. Both, excess or short of rainfall damage the crops and fetch poor yield to farmers.

Indian economy is categorized in the urban and rural economy. If the behaviour of the monsoon is abrupt then the whole economy takes a hit in general. Thereby the rural economy badly hit in particular.

Farmers get lower proceeds for their produces and lead to less disposable income in the hands of the farmers. The spending power of the farmers deteriorates.

As discussed above if the monsoon is not favourable then farmers earn less and spend less. The farmers buy fewer articles and less quantity produced, manufactured and marketed by the corporate listed on the stock markets. Sales of the companies catering to rural economy contract and lower sales have leverage on the profits of the companies. Profits of the companies drive the stock prices movement. So if the effect of monsoon on market remains buoyant rural economy flourish and stock prices perform well and if the monsoon remains sluggish then the rural economy contracts. The contraction of the rural economy affects the sales and profits of the companies and stock prices remain subdued.

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