Monsoon Boost: Agri-Linked Sectors Expected to Grow 10–15% in Earnings This Fiscal

Mumbai: Sectors tied to agriculture—such as tractors, agri-inputs, rural NBFCs, and consumer durables—are projected to witness a 10–15% year-on-year earnings growth in the second half of FY26, according to a report released on Wednesday. This growth is expected to be driven by stronger rural liquidity and a rebound in demand, assuming the monsoon continues with above-average intensity and widespread distribution across key agricultural regions.

With expectations of a robust monsoon intact, the benefits of stable crop yields and easing global commodity prices are becoming clearer. Additionally, a 25 basis point cut in the repo rate to 5.75% is widely anticipated in the upcoming monetary policy review on June 6. A further rate cut to 5.50% by August is possible if inflation stays below 4%, potentially giving a significant lift to rate-sensitive sectors like housing, automobiles, and NBFCs, the report by smallcase manager GoalFi stated.

"India is in a rare sweet spot in 2025 — the monsoon arrived early and brought above-average rainfall, and a decisive electoral outcome has paved the way for policy continuity," said Robin Arya, Founder of GoalFi and a smallcase manager.

He noted that this alignment sets the stage for stable inflation, rising rural consumption, and capex-driven growth. With sectoral rotation already in progress and supportive monetary policy expected, rural-focused and interest rate-sensitive sectors are well-positioned for strong performance in the coming quarters.

The early signs of a good monsoon are already visible in the inflation data. In April 2025, retail inflation (CPI) fell to 3.16%, while food inflation dropped to just 1.78% — its lowest level in several years.

The equity markets may also benefit from increased visibility around consumption, declining inflation, and an easing monetary environment. These factors could drive Nifty 50 returns by 6–8% over the next two quarters, led by midcap stocks and interest rate-sensitive sectors.

Historically, a normal monsoon boosts rural incomes by 5–7%, setting off a ripple effect across consumption-driven industries.

FMCG companies are likely to see a rise in volumes in mass-market product categories, while two-wheeler sales—especially entry-level bikes and scooters—are expected to bounce back. Rural NBFCs and microfinance institutions also anticipate stronger credit demand and improved loan repayment behavior.

The post-harvest festive season from August to October is projected to further fuel discretionary spending in rural areas, the report added.

With inputs from IANS