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#39;Financial year 2020-21 could be the year for agricultural sector#39;

June 02
14:05 2020

Ajitesh Mullick

Good news on the weather front boosted the Indian markets as equity rose significantly. IMD (Indian Meteorological Department) and Skymet have both announced the arrival of Monsoon on Kerala coast on time/before time.

Continuous lockdown over the last few months have adversely affected the Indian economy due to shutdown in most industries. With agriculture forming nearly 15-18 percent of Indian GDP over the last few years, its importance in providing cushion to the Indian economy will gain even more relevance this financial year as growth in other sectors falter due to coronavirus.

India being the largest producer, consumer and exporter of most agri items, a strong growth in this sector this year will provide a huge boost to the Indian Economy. With a record foodgrain production this year, too, a good monsoon will certainly enhance the production of 2020-21 kharif and rabi crops. Excess production will be beneficial in a way when we find countries fighting the coronavirus globally.

Faced with a food crisis in some parts of the world and a lower import from India over the last 3-4 months due to lockdown, as Indian markets gradually open, there is expected to be huge export demand from India. A rising export, aided by a strong Dollar versus Rupee, will be beneficial for traders and farmers alike.

With the Indian government opening up the markets for farmers throughout India (as per its recent Rs 1 lakh crore package), high stress on transportation, infrastructure and warehousing are factors beneficial for farmers in the long run.

Generally, when monsoon reports are normal, agri prices tend to fall – at least in the short term. But this year, there was no such strong case as of now. This may be due to the recent fall in prices over the last 3 months due to low trading from coronavirus. Thus the bearish impact of the markets seem to have been discounted already. Traders also feel present rates to be very much on the lower side. Thus they expect further fall may not be sustainable and the arrivals in mandis will be greatly affected.

The Union Cabinet on June 1 approved the minimum support price for 14 kharif crops. The higher prices will provide farmers nearly 50-83 percent more than the cost. This news is bullish for the agri sector. It will help raising the farmer income too.

This week, we can see some more upside movement in agri prices. Chana is looking bullish having found strong Support at Rs 4,000 per quintal. Spices have not shown very strong movement. But we expect Jeera to touch the Rs 15,000 per quintal mark very soon. Oil complex too looks bullish along with Cotton and Cocud.

Firmness in agri prices could boost the production and GDP further. The year 2020-21 could well be the year for the Indian Agricultural sector.

The author is VP-Retail Research at Religare Broking.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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