Shares of fertilizer, seed and tractor stocks are likely to remain under pressure following the India Meteorological Department’s (IMD) latest forecast which lowered the 2026 monsoon rainfall expectation to 90% of LPA (Long Period Average) from 92% forecasted in April. Reacting to the development, shares of monsoon-dependent companies fell sharply on Friday as low rainfall may lead to weaker demand across multiple sectors.
In the fertiliser pocket, Fertilisers and Chemicals Travancore (FACT) fell more than 5% on Friday while Rashtriya Chemicals and Fertilizers (RCF) cracked more than 3%. Chambal Fertilisers and Chemicals and National Fertilizers (NFL) also fell about 3% each. Tractor and farm-equipment manufacturers also came under pressure with Escorts Kubota, Eicher Motors and Mahindra & Mahindra falling between 2-3% on Friday.
“Lower rainfall during the crucial kharif season is likely to keep the total area sown lower. Yield too is likely to get impacted especially for water intensive crops such as rice and sugarcane. Though expanded irrigation network will partly mitigate this issue, lower monsoon years are usually associated with lower production which impacts rural incomes. This dampens rural consumption impacting sectors such as Fertilizers, Agrochemicals, FMCG and Auto,” said Sunny Agrawal, Head - Fundamental Research at SBI Securities.
Low monsoon forecast was one of the primary reasons why India’s equity market closed significantly lower on Friday with benchmarks – BSE Sensex and NSE Nifty50 - falling up to 1.5%. The development comes on the backdrop of the West Asia crisis, soaring oil prices and relentless FII selling which are troubling the local market.
“A weaker-than-expected monsoon forecast (now at 90% of long-period average) negatively affects the stock market by hurting rural incomes, farm output, and consumption. Since nearly 50-55% of India's farmland is rain-fed, lower rainfall reduces kharif sowing and yields, leading to weaker demand for agri inputs and rural goods. This creates short-term selling pressure on monsoon-dependent sectors, increases food inflation risks, and weighs on overall GDP growth expectations,” said Santosh Meena, Head of Research at Swastika Investmart.
Meena added that companies most at risk include fertiliser firms (FACT, NFL, Chambal Fertilisers), seed companies (Kaveri Seed), tractor makers (Eicher Motors, Escorts), and agrochemical players, along with rural-heavy two-wheeler and FMCG names. Shares of Hero MotoCorp and Bajaj Auto fell more than 3% each on Friday.
“These face potential volume declines from lower farmer spending and sowing. Investors should adopt caution in the near term: reduce exposure to high rural/agri-cyclical stocks, diversify into defensive sectors, and monitor actual rainfall patterns in June. Avoid panic selling; use dips selectively for quality companies with strong balance sheets. Stay updated on IMD forecasts and government relief measures, and maintain disciplined position sizing,” said Meena.
Adding to the monsoon worries, the IMD also highlighted that El Nino conditions are likely to be weak in June but remain moderate to strong in September. Currently, neutral El Nino-Southern Oscillation conditions are transitioning towards El Nino conditions over the equatorial Pacific region. The emergence of El Nino conditions leads to less monsoon rainfall in the country.
Agrawal of SBI Securities said that on the other hand, sectors such as Power and Consumer Durables benefit from higher demand as elevated temperatures during El Nino years increase the demand for cooling products such as ACs, Air coolers, and fans. Beverage companies such as Varun Beverages can also benefit from this scenario, he added.
