The India Meteorological Department (IMD) has predicted the earliest arrival of the southwest monsoon in over a decade, surprising many who did not expect the rains to come so soon
Several industries had set plans and targets based on a longer summer season, but now these sectors are likely to be affected as the early monsoon disrupts their usual business cycles.
Industries such as cement, paints, air conditioning (A/C), and beverages rely heavily on high demand from April to June. An early monsoon disrupts this cycle, leading to excess inventory, price pressure, and muted financial results for companies in these sectors. This article looks at how an early monsoon affects these industries and highlights some key companies that might feel the impact.
Industry and Stocks Affected by Early Monsoon
Cement Industry
The cement industry usually sees strong demand from January to June because this is the main time for construction before the monsoon rains slow work down. Companies try to raise prices during this busy period to earn more.
But if the monsoon comes early, especially in places like South India where it arrives first, construction gets delayed. This means fewer people buy cement, dealers have to give discounts, and prices drop. Because of this, companies expect lower sales and less growth in the first quarter of the year.
Here are some key cement companies likely to be affected by the early monsoon: UltraTech Cement, Ambuja Cements, Shree Cement, ACC, Ramco Cements, and Dalmia Bharat and more.
These companies’ share prices may become less attractive to investors because early rains are likely to reduce cement demand and lower profits by slowing down construction works.
Paints Industry
The paints industry, like cement, depends a lot on construction and home repairs. Summer is the best time for building and repainting, but when the monsoon comes early, these activities slow down.
This means companies have less time to sell their products, which can lead to extra stock piling up and the need to reduce prices and they might also need more money to manage the unsold paint.
Here are some key paint companies likely to be affected by the early monsoon: Asian Paints, Berger Paints, Kansai Nerolac, Indigo Paints, and more. These companies may report slower growth and pressure on profit margins in the coming quarters as the monsoon has arrived early and is lasting longer than usual.
Beverages Industry
The beverages sector, especially drinks like soft drinks and juices, usually sells a lot more in the summer due to dehydration and other factors. But if the monsoon comes early, the summer season is shorter.
This means companies sell fewer cold drinks and may end up with extra stock. To sell this leftover stock, they might have to offer discounts or special deals. This affects both big companies and smaller local brands.
Here are some key beverage companies likely to be affected by the early monsoon: Hindustan Unilever (tea, juices, packaged water), Tata Consumer Products (packaged water, juices), Dabur India (fruit juices, packaged water) and Varun Beverages, and more.
While HUL and Dabur are FMCG giants with diversified portfolios, their beverage segments are expected to face challenges due to the early and prolonged monsoon.
Air Conditioning (A/C) Industry
The air conditioning industry sells the most during the hot summer months. Companies prepare by stocking up, expecting high sales. But if the monsoon comes early, temperatures drop quickly, and fewer people buy A/C units, which may force them to lower prices or offer discounts, reducing their profits. Both makers and sellers of air conditioners are affected.
Here are some key air conditioning companies likely to be affected by the early monsoon: Voltas, Blue Star, Whirlpool of India, Havells India (A/C division), and more. These companies may experience slower sales growth and pressure on profit margins due to weak demand and excess inventory caused by the early rains.
Conclusion
An early monsoon is good for farming and rural spending, but it can hurt businesses that rely on strong summer sales. Industries like cement, paints, air conditioning, and beverages may face lower sales, extra stock, and falling prices soon.
Investors should watch these sectors carefully and might want to wait before investing. On the other hand, areas like fertilizers, agrochemicals, and products for rural markets could do better as the monsoon helps farmers and rural incomes grow.
Written By Sridhar J
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