How to play El Nino trade on D-Street? Why power & cooling stocks may take centre stage this monsoon

Healthy rains normally translate to steady rural demand, which offers an opportunity for investors to focus their agriculture-linked trade for the year. This year, early projections of monsoon -- a crucial season that usually runs from June through September -- point to a slightly different situation, with a higher-than-usual chance of El Nino conditions.

Analysts anticipate a shift in demand from rural to urban and temperature-driven consumption this year, with the rise in mercury leading to a pickup in electricity demand. They see improving earnings visibility in temperature and power-linked plays in the market.

What is El Nino? How does it impact agricultural output?

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El Nino is a specific climate pattern typically characterised by warming ocean waters in the central and eastern Pacific, which tends to disrupt the Indian monsoon season and hinders agriculture productivity in the region.

What to expect this monsoon? What private forecaster says

In its first estimate of the season, private weather forecaster Skymet has predicted below-average precipitations in India this monsoon, with a possible rise in El Nino.

El Nino conditions are seen hurting agriculture- and other rural-focused sectors.

Analysts await national weather office IMD's projections for the upcoming monsoon season that is crucial for agricultural productivity in the country, where a majority of farmers rely on rains for irrigation. Some predict a decline in rural incomes due to these conditions.

Jefferies sees 60% chance of El Nino

According to foreign brokerage Jefferies, there a 60 per cent chance of El Nino this year.

Historically, years marked with El Nino conditions have seen rainfall deficits to the tune of 15 per cent, say analysts at the brokerage.

Which sectors may benefit in case of El Nino?

A rainfall deficit of 5-10 oer cent may boost earnings of summer demand-focused businesses, estimates show.

According to Zee Business research, the following companies are set to benefit from El Nino:

• Power and cooling: Air conditioners and fans
• Electricity: Power generation, transmission and distribution
• Utility
• Construction materials and services: Dry weather supports faster project execution

Monsoon-linked Stocks in 2026: Which shares to chase and which to avoid?

According to Zee Business research, the upcoming monsoon season is set to augur well for power, utility, cooling and related white goods companies, whereas rural demand-heavy and mass consumption themes -- like automobiles, FMCG and agricultural input providers -- are likely to face pressure.

Another foreign brokerage, Macquarie prefers premium-end plays like Titan along with strong consumer brands like Marico, Lenskart, HUL and Trent, and remains cautious on rural-focused plays like Dabur and Britannia.

According to the brokerage, the premium end looks more insulated from headwinds like weak monsoon and lower fertiliser availability.

It sees the highest rural sales salience in Dabur (at 45-50 per cent), followed by Britannia (40-45 per cent) and Nestle India (20 per cent).

Power demand set to rise in H2 2026

Power demand is estimated to strengthen in the second half of the calendar year, aided by weather and structural drivers, analysts at brokerage Bernstein wrote in a research report last month.

According to the brokerage, the following tailwinds are set to drive this pattern:

• Near-term demand recovery on a low base
• Supportive weather
• Long-term growth from data centres
• Defensive sector amid global uncertainty

A transition from La Nina -- the opposite of El Nino -- to El Nino may begin in May, causing higher temperatures and lower rainfall compared with historical averages, according to the brokerage.

Bernstein revised its expectations for power demand growth in FY27 to around 0.9 times real GDP growth, from 0.8 times earlier.