- India faces a 60% chance of El Nino causing a deficit monsoon in 2026
- El Nino typically leads to a 15% rainfall deficit over the past 25 years
- Stocks like NTPC, Adani Power, Voltas, and UltraTech could benefit from this
India could be set for a deficit monsoon in 2026, thanks to the impact of El Nino, which in turn could serve as a potential earnings boost for India's power and consumer appliance stocks, according to Jefferies.
In its latest note, the global brokerage firm has pointed out that following years of excessive rainfall, weather forecasts indicate there is a 60% possibility of an El Nino event during the upcoming June-September monsoon season. While a rain deficit usually puts pressure on rural demand, Jefferies suggests a moderate deficit of 5-10% could actually support corporate earnings growth, particularly for stocks reliant on 'summer plays'.
The El Nino Factor
El Nino is a climatic phenomenon which results in the unusual warming of surface waters in the eastern tropical Pacific Ocean. For India, this often leads to below-normal rainfall. Historically, El Nino episodes have resulted in an average 15% rainfall deficit over the last 25 years.
Potential Rainfall Deficit: Key Winners
In the event of a rainfall deficit, we usually witness an increase in electricity demand, primarily from two sources. Agriculture is the first source, as it requires more power for irrigation pumping. Residential use also increases, driven by higher cooling needs.
Specific stocks positioned for potential earnings upgrades include:
Utilities and Generation: NTPC, Adani Power and JSW Energy.
Transmission and Distribution: Power Grid and Tata Power.
Consumer Appliances: Voltas, Blue Star and Havells India are expected to see a rebound as demand for ACs and fans climbs.
Infrastructure: Cement players like UltraTech and Ambuja may benefit from uninterrupted construction activity during a drier season.
Mitigating Rural Risks
While a deficit is sentimentally negative for farm-linked stocks like Mahindra & Mahindra (tractors) and Hindustan Unilever (staples), record-high water reservoir levels—currently 13% higher year-over-year—and improved irrigation are expected to cushion the impact on agricultural output.
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