Stock market so far free from the impact of El Nino threat

- Sensex and Nifty-50 fell by 5 and 4.1 percent respectively in 2015 due to El Nino.

The biggest short-term risk for markets is lower-than-expected rainfall due to El Nino this year, although its full impact on prices is yet to be seen. The onset of monsoon in Kerala on June 8 is almost a week late.

Analysts said the Sensex recently hit a new all-time high but the market may see a slight dip now and El Nino could also be the main reason for this.

El Nino is a weather phenomenon that occurs when temperatures in the central and eastern Pacific Ocean become abnormal and atmospheric patterns change. Due to which the Indian subcontinent is seeing weakness in monsoon. Due to this El Nino also affects the Indian Monsoon.

Analysts say lower-than-expected rainfall and an uneven monsoon could lead to fears of a rise in food and fuel inflation, which could also impact the Reserve Bank's monetary policy.

The Reserve Bank is also concerned about inflation and has cut its forecast for fiscal 2024 by 10 basis points to 5.1 percent.

Morgan Stanley said the agency is concerned about El Nino, because of its increasing potential and the fact that its persistence could lead to extremely hot or dry weather in India, which would also affect rural areas. Reports suggest that this year, rainfall in many parts of the country is expected to be below normal in June.

Economists said the risk of El Nino remains and could impact the next kharif crop and fuel, food inflation. Although the Indian Meteorological Department has predicted a largely normal monsoon, uneven rainfall will affect food production.

Not all years associated with El Nino have been bad for markets. In the last two decades (since 2002), India has witnessed four El Nino years - 2002, 2004, 2009 and 2015. The data shows that except 2015, the market performed well in all other years. In 2015, the Sensex and Nifty-50 indices lost 5 and 4.1 percent in the calendar year.

So far in the calendar year 2024, Sensex and Nifty-50 have risen by around 4 percent. Markets will keep an eye on the monsoon for the next one-two months before deciding their course. He said investors are already worried about the delay in monsoon, though the RBI's monetary policy has provided some relief.