Mixed sentiments seen on Dalal Street: IMD estimates and Greek optimism

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Mixed sentiments seen on Dalal Street
India's Benchmark Sensitive Index is undergoing through upswings and downswings due to many factors ranging from low estimates of Indian monsoon rains, which is vital to the country, and signs of hope coming from Greece.

Rainfalls over the country are likely to be below normal this year, the weather department said in its press release on Tuesday. According to revised forecast by India Meteorological Department (IMD), south-west monsoon rains would be 95% of the long period average (LPA).

IMD defines, rainfall levels between 96-104% as 'normal rains'. And current estimate is less than what the IMD was expecting in April. The IMD also mentioned that there could be a break in July rains so this may impact the sowings of June, since 60% of the farm sector depends entirely on June to September rains.

Since, July is the key sowing period for several key 'kharif 'or summer-sown crops, and with 23.5 crore farmers in India depend on rain for irrigating crops. This could be grim news for the rural India. Agricultural sector in India makes up almost 14 percent of economy and weakened farm production may hamper farmers income growth.

"The downward revision in monsoon data will not affect agriculture production. There will be well-distributed rainfall in the country. I don't think it will have an adverse effect on production," Ajit Tyagi, director general of the IMD stated yesterday.

On the trading side, Hindustan Unilever, the biggest household products maker in India, dropped the most in two weeks contributing to below normal monsoon rains.

Greek Prime Minister George Papandreou won a parliamentary confidence vote, which in turn boost the confidence among investors. Good news from Greece spurred market activity and sparking rally is seen in global equities. Infosys, a software exporter that gets 22 percent of its revenue from Europe, rose the most in two weeks.

Economic concerns
India is going through high inflation rate scenario along with other Asian economies; inadequate rains over the coming months may further accelerate inflation. Central banks have raised key policy rates 10 times since March 2010 to curb inflation while hurting economic growth.

India"s benchmark wholesale-price inflation is at 9.06 percent in May, quite high from 8.66 percent in April.

Global food prices will remain higher in the next decade than in the past 10 years as agricultural production slows and demand increases, the Organization for Economic Cooperation and Development and the United Nations" Food and Agriculture Organization said in a joint report dated June 17.

A below normal monsoon this year may prompt the government to keep a ban on exports of wheat and rice, and extend curbs on shipments of sugar.

However, it is still early to evaluate how much the forecast rainfall level will impact sowing and output of key summer crops, according to Analysts, but they have given a preventive note.

OneIndia Money

Read more about: economy, inflation, rainfall, greece, infosys
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