Rainfall in India will pick up over the coming fortnight, witnessing a healthy recovery from the current deficit rainfall, according to Nomura Holdings Inc.
It is still "early days" to call for a deficit monsoon season in 2023, the brokerage said as July and August cumulatively account for two-thirds of the monsoon season.
The notable past instances over the past 20 years of good recovery despite a weak start help provide basis for Nomura's view.
Expected Rain Pickup
The India Meteorological Department and the Skymet Weather Services Pvt. have predicted an increase in rainfall over the next two weeks as well as typical monsoon conditions across India in the first half of July.
While the formation of Cyclone Biparjoy led to the first fortnight of June to observe rainfall 37% of its long-period average, the good onset of rain in the past week across different regions has lead to a reduction in pan-India monsoon deficit to 28% below its long-period average, the brokerage said in a note on Tuesday.
The regional rain distribution this week in the peninsular southern India and central India have also increased and numbers grow closer to the long-period average.
The occurrence of El Nino—unusual warming or above-average sea-surface temperatures in central and eastern tropical Pacific Ocean—would have a potential impact in the latter half of August and early September, Nomura said. However, there is a strong possibility of a positive Indian Ocean Dipole that would neutralise El Nino, it said.
The IOD is the difference in ocean surface temperature between a western pole in the western Indian Ocean and an eastern pole in the eastern Indian Ocean. A positive IOD causes greater precipitation in the western Indian Ocean region.
Kharif Crops, Reservoir Levels
The overall sowing area of kharif crops picked up over the past week with the onset of monsoon and was currently only 4.5% below last year's levels, Nomura said. The sowing of important kharif crops like paddy, oilseeds, and pulses has increased significantly.
Although the cultivation of kharif crops on more than 65% of Indian agricultural areas depends on the monsoon, the brokerage said both annual and weekly reservoir levels were above the 10-year average and would be a key factor if the monsoon faltered. Kharif commodity prices haven't seen material changes.
Rural Market Demand
Nomura doesn't see any signs of softness on consumer demand due to the delayed monsoon. Rural markets have been recovering at a gradual pace.
The brokerage said the full benefits of Rabi harvest money had still not translated into consumer demand, which would further support rural demand recovery on occurrence.
Nomura said stable raw material prices resulted in lower inflation and the price cuts across major fast-moving consumer goods categories would likely act as stimulus to drive volume growth in the rural markets.
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