Will Monsoon Spark a 10-15% Earnings Growth in Agri-linked Sectors This Fiscal?

Mumbai, June 4 (NationPress) Sectors including tractors, agri-inputs, rural NBFCs, and consumer durables are projected to experience an earnings growth of 10-15 percent year-on-year in the second half of this fiscal (H2 FY26) — bolstered by rural liquidity and a recovery in demand — provided that the monsoon delivers above-average intensity and distribution across vital agricultural regions, as stated in a report published on Wednesday.

The anticipation of a favorable monsoon remains strong, with the effects of stable crop yields and declining global prices becoming increasingly apparent. A 25-basis-point cut in the repo rate to 5.75 percent is widely expected during the policy decision on June 6.

A further reduction to 5.50 percent by August is likely if inflation stays below 4 percent. These rate cuts could significantly benefit interest-sensitive sectors such as housing, automobiles, and NBFCs, according to the report by smallcase manager GoalFi.

“India is positioned uniquely in 2025, with the monsoon arriving early and producing above-average rainfall, alongside a decisive electoral result setting the stage for policy consistency,” remarked Robin Arya, smallcase Manager and Founder of GoalFi.

This alignment creates a stable foundation for controlling inflation, enhancing rural consumption, and fostering capex-driven growth. A rotation among sectors is in progress, and with anticipated supportive monetary policy, rural-centric and interest-sensitive segments are likely to excel in the upcoming quarters, he added.

The prospect of a strong monsoon is already reflected in food inflation. In April 2025, the CPI inflation decreased to 3.16 percent, while food inflation plummeted to 1.78 percent, the lowest in several years.

The broader equity market could also gain from enhanced visibility in consumption, reduced inflation, and monetary easing — potentially propelling Nifty 50 returns between 6-8 percent over the next two quarters, primarily driven by midcaps and interest-sensitive sectors.

A normal monsoon has historically boosted rural incomes by 5-7 percent, creating a ripple effect across consumption-related sectors.

FMCG giants are anticipated to witness volume increases in mass-market segments. Sales of two-wheelers are also expected to rebound, especially in entry-level motorcycles and scooters. Rural NBFCs and microfinance institutions foresee improved credit demand and repayment cycles.

Moreover, the post-harvest festive seasons from August to October could spur discretionary spending across rural areas, as highlighted in the report.