How India's Stock Market Has Performed Historically In El Nino-hit Years

The possible impact of El Nino on this year's monsoon is a threat looming all over our country at present.

This year's monsoon is progressing under the cloud of El Nino, which is a phenomenon that refers to the abnormal warming of the Pacific Ocean. The phenomenon leads to lower rainfall and is also being seen as a key risk to India's stock market by many analysts.

While a weak monsoon due to El Nino can hurt the agriculture and rural economy, the impact of this phenomenon on India's equity market has not been something to worry about, at least as per the historical data.

Stock Market Performance During El Nino-hit Years

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Historical data of India's stock market performance following El Nino shows that the domestic equity market has mostly risen over the three-to-six-month period after the El Nino effect set in the country.

Previously, India witnessed the El Nino effect in 2002, 2004, 2006, 2009, 2014, and 2015. The Nifty has fallen on two out of the six occasions over a three-month period and once over a six-month period. The average three and six-month Nifty returns post-August in these six years are 5.29% and 12.1%, respectively, while the one-year forward returns have been 22.82%, as per data from discount stock broker firm Samco Securities, as per ET report.

"We have observed that the Nifty has generally performed on a positive note for most of the past EL Nino years," said Apurva Sheth, head of research at Samco Securities. "Export-oriented sectors like pharma and IT could be a good bet if the monsoon disappoints."

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Shares That Can be Impacted Due To El Nino

philstar

Shares of companies in consumer-centric and agriculture-oriented industries, such as agro-industries, FMCG, and other consumer goods and services, could come under pressure due to El Nino, said analysts, the report mentioned. The full effect of El Nino depends on its degree, from high, moderate, to weak. As per the data, El Nino occurred 12 times in the last four decades. India received normal or above-normal rainfall in 5 out of these, indicating a probability of 58% for sub-normal rainfall.

For 2023, India Meteorological Department (IMD) forecasts a normal monsoon and, in anticipation of positive IOD (Indian Ocean Dipole) conditions in the Indian Ocean, limited the monsoon band at a low of 96%.

How Nifty & Sensex Have Performed This Year

ET

It's been mostly a happy period for investors as both Nifty and Sensex are inching towards their all-time highs this year. Nifty has been up 2.7% this year to date, whereas Sensex is up 2.86%.

Last year, Sensex had outperformed most of the major stock market indices in a year which saw lots of turbulence globally amid the war and rising recession fears.

This year has also seen MRF becoming the first ever stock on Dalal Street to hit the Rs 1 lakh mark. It's currently the most expensive stock in terms of share price in India's stock market.

Also Read: World's Biggest Stock Market Crashes Of The 20th Century

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