India's Monsoon Never Came, Indian Markets Don't Care

We noted the issues with India's monsoon season 2 months ago [Aug 7, 2009: India's Growth May Suffer Due to Weak Monsoon Season], but now it seems clear the rains just did not come this year. That said, the Indian market seems to care less.


After some consolidation, sugar continues to be a star. [Aug 31, 2009: Sugar - it's like AIG, Except you Actually Need It]

Via Bloomberg

• India’s monsoon rainfall, the main source of irrigation for the country’s 235 million farmers, is the weakest in more than three decades, threatening farm output in the world’s second-biggest producer of rice, wheat and sugar.
• Falls in the June-September season are 23 percent below the long-period average, the most since the 23.9 percent deficit in 1972.
• Sugar jumped to a 28-year high amid forecasts that India, the biggest user, will remain the largest buyer after a drought in half the nation hurt crops of cane, rice and oilseeds. Rains returned in mid August, following a driest June in eight decades, filling up lakes and aiding efforts by Prime Minister Manmohan Singh’s government to lift winter-sown crops including wheat.
• “The government will now need to put all its efforts in salvaging the winter agriculture production,” said Dharmakirti Joshi, an economist at Crisil Ltd., a unit of Standard & Poor’s.
• The monsoon-sown rice production will fall 10 million tons from last year’s record as inadequate rainfall forced farmers to pare acreage by 6.1 million hectares. Duty-free imports of white sugar will be permitted until May or June, extending an earlier exemption, to bolster supplies, Farm Minister Sharad Pawar said last week. The nation may have a shortfall of 8 million tons in 2009-10 season, Czarnikow Group Ltd. said this month.
• The impact of falling farm output on economic growth and consumer spending is likely to be countered by the government’s actions to support incomes of the rural and urban poor, Crisil’s Joshi said. Food prices will be pressured by drought, he said.

Comments

[Mad Hedge F...:]

ina India has been one of my stellar picks this year, the “I” in BRIC, rocketing 112% from the March lows (click here for my initial report ). Although it appears overheated for the short term, I believe it has much further to run over the long haul. You want to buy countries that have yet to build infrastructure and a middle class, and China has already done that. India’s per capita GDP came in at a sparse $1,016 last year, compared to $6,100 for the Middle Kingdom. China’s economy today is about on the same level that Japan experienced during the late fifties, while India is still in the late twenties, with large parts effectively mired in the 16th century. India’s recent election of a more pro-business government was the trigger for improved growth, which is expected to exceed 6% for the rest of the year. India’s economy is entirely domestic, and is so far outside the world economic system that the global financial crisis was barely felt there. While we were melting down with a minus 6% GDP rate, India continued to bask in a plus 5.8% growth rate. No subprime debt, toxic portfolios, foreclosure crisis, government bailouts, or AIG, GM, or Chrysler. With 1.2 billion consumers, some 70% of GDP there accounted for by consumer spending, so retail figures large in the country’s future. Even Harley Davidson (HOG) has big expansion plans in the world’s largest user of motorcycles. For those of the ETF persuasion, look at Wisdom tree’s earnings based offering (EPI) or the one from PowerShares (PIN). Better start checking your share prices in rupees.

Oct 01 07:42 AM

[keithpiccir...:]

A+ for timeliness Mark.
Hedge funds have been piling into sugar, but when it drops it will be a broken elevator cord type of move.
Mad Fund Trader:
IFN is one that had multiple tops, and I was looking for it to get to $32.

finviz.com/quote.ashx?...

Oct 01 08:11 AM

[John Galt:]

There was a story in yesterday's journal highlighting Brazil's problems as well and they are the #2 producer. Then of course they mentioned the hedge fund speculation.

Oct 01 08:58 AM

[TraderMark:]

good to see you here Keith.

Yes so many stocks, and sugar as well have reached terminal velocity on their breakouts that there is little support on the way down.

Month 8 of the S&P rally now in books. Record is 9 months

Et tu October?


On Oct 01 08:11 AM keithpiccirillo wrote:

> A+ for timeliness Mark.
> Hedge funds have been piling into sugar, but when it drops it will
> be a broken elevator cord type of move.
> Mad Fund Trader:
> IFN is one that had multiple tops, and I was looking for it to get
> to $32.
>
> finviz.com/quote.ashx?...

Oct 01 11:02 AM

[himlynx:]

TraderMark is on the mark !

Oct 02 12:53 AM

[Faisal Humayun:]

I think Stock Markets in general have very little correlation with the real economy (especially when Governments all over the world are providing liquidity support to asset classes).

As for India, I agree that it is doing relatively well then rest of the world but it has its own problems. The agri sector employs around 60% of the population and contributes less then 20% to the GDP.

The per hectare crop yield in India is half that of China. While high stock markets and relatively better GDP growth is a good thing one needs to address these issues. India can only grow at its target of 9% if the agri sector grows.

Another big problem in India is the Government Sector. It has control of major resources and its not new that Government sector is relatively inefficient. India has a huge power problem and private sector only has only 13.5% of the total installed capacity.

India can grow much faster if the Government frees up the sectors and makes them more competitive.

Oct 04 12:01 PM