Do "seasonal" stocks do well for short-term?
On Monday, domestic markets ended at record high. Sensex closed at 31,109.28, up 81.07 points or 0.26%, while Nifty closed at 9,604.90, up 90.80 points or 0.10%.
Weather forecaster, Indian Meteriological Department (IMD) said that North Eastern states is expected to witness heavy rainfall in next two days.
In its first prediction in April, IMD has estimated normal monsoon for this year.
This brings in short-term investor in picture. If you are looking for short term investment this year, then you should know about "seasonal stocks".
Seasonal stocks are generally based on seasons and they are tend to be in focus depending on the product in which company is into and what season is it. For example, during summer season, Air Conditioner maker companies will be in focus.
Given the fact that 66% of India’s population still depend on farm income, so a good monsoon as predicted by the IMD will result in surge in stocks of companies in farm inputs and farm equipment.
At a later stage we could see an increase in rural consumption, both staples and discretionary. This means, the companies having exposure in rural consumption will come into limelight.
Sharing the outloook, Arun Gopalan, Vice President, Research, Systematix, said, "As the monsoons begin we expect to see an increase in the demand for farm equipment, such as tractors, tillers, pumps, PVC pipes and tubes."
Here's a look at the performance of six companies based on last year monsoon. Here the time period took as is May-September, 2016.
If we divide the monsoon period (here May-September) sowing of seeds and after harvest season, there are companies, which have performed well and given robust returns to its investors in just four months.
"As the monsoons begin we expect to see an increase in the demand for farm equipment, such as tractors, tillers, pumps, PVC pipes and tubes. As sowing begins, we expect to see a rise in the demand for agricultural inputs such as seeds and fertilisers. After the harvest season, post the monsoons, we expect farm income to rise, leading to an increase rural consumption. We expect increase in sales of consumer staples, consumer durables, 2-wheelers, air-conditioners," Gopalan added.
If we look at the table below, even though the companies have given returns in the range of 3-30% and one company over 115%, but the same companies have performed well over an year.
This story is for informational purpose and is not an investment advisory.