Apart from the weak data emerging from the eurozone, Indian equities have domestic headwinds to contend with as well. Lack of government action, sluggish growth and high inflation has plagued the market for the past many months, but now a more serious issue has cropped up.
Weak monsoon this year has hit sentiment in the country, increasing worries about the country’s economic development. The Indian Meteorological Department has said that rain deficit average is 22%, but some parts of the country are approaching drought like conditions.
This situation will pose as a hurdle for the market going forward, says Sangeeta Purushottam, managing director of Nine Rivers Capital. In an interview to CNBC-TV18, she says that the street cannot shrug this off because of the impact that it has on the economy.
“I think at the economic level, a poor monsoon will impact consumption and the FMCG pack could see down trading happening,” she said, adding that “whatever is linked to monsoon, be it tractors or be it fertilizers etc, will be pockets which will get affected.”
However, from the FMCG space, Purushottam is positive on HUL for the near-term. Valuations are stretched, but she believes this will sustain because of the company’s earnings growth. “Where it gets a little dangerous is if you are buying it with a long-term perspective, because then you have very little room for error here,” she said.
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