Rains are the natural way to boost productivity of lands. Can it affect stock markets? Traders are often eager to know how rains can affect stock markets.
Rains are known to have significant impact on the overall economy of a country. Its impact is more visible in countries whose economy is more dependent on agriculture.
According to a 2015 study conducted by researchers at Case Western Reserve University, weather changes may affect how institutional investors decide on stock plays.
Rain, winds & cloud tends to discourage stock purchases while sunny skies promote institutional buying. Monsoon rains are necessary to replenish water reservoirs & lift ground water levels. This allows better irrigation facilities & greater generation of hydropower.
A stronger economic outlook can raise investor’s sentiment in stock markets. Therefore, traders & investors are advised to trade & invest in stocks cautiously during monsoon season. Here are 6 significant ways monsoon can impact share markets:
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(1) Excess Rains Can Cause Slide In Share Price
It is one of the most significant ways rains can affect stock markets. Excess rains can have adverse impact over standing crops. It can cause water lodging or flood like situations. This in turn results in severe damage to standing crops.
It can also cause delay in sowing of new crops until water is removed or absorbed by land. These situations can cause significant rise in rate of inflation. A rising inflation can quickly disturb the home budget of any family.
It can also adversely affect purchasing power of general public. This difficult situation greatly affects sales of companies like FMCG, automobile, consumer goods & many more.
Similarly, heavy rains are also known to interrupt business processes, project installations, supply chains, & consumer movements.
These effects are quickly assessed by big investors in stock markets. Thus, stock prices of concerned companies in stock market slides significantly.
- Rains & Stock Markets: Shutterstock, NYSE and BSE