Does Monsoon Impact Market Returns?

Monsoons play a vital role in India's economy given that 58 percent of rural households depend on agriculture as their principal means of livelihood, according to data provided by the Central Statistics Office. That would suggest that monsoons have a critical impact on the economy and by extension on the stock markets. Not quite.

As per data compiled by BloombergQuint, there is little correlation between the quantum of rainfall and stock market returns in that year. A look at the last eight years shows that in the four that witnessed deficient rainfall, equity indices delivered positive returns.

In 2009, the Nifty gained 76 percent, the highest in 8 years, even though the rainfall deficiency was as high as 19 percent.