When you invest in a stock market you have to see two things – the sentiment and the season. By sentiment I mean whether or not the majority of investors are in bullish mode or bearish mode and by season I mean whether it is monsoon, summer or winter.
Now sentiment is very easy to judge. But investing according to seasons is a tricky thing. The season helps us with investment keeping in mind the fundamental thinking of Buying Low and Selling High.
Nearly 80% of the stocks are directly or indirectly related to monsoons and the festive season that comes after that.
Sectors that are hugely dependent on monsoons are agriculture, fertilizer, farm equipment, retail companies, cement stocks, real estate properties, automobile companies and textile business. There may be few more sectors.
Now the biggest dilemma is what to buy during monsoon?
My answer would be shares of companies that deal in fertilizers, textile and farm equipment. An onset on monsoon indicates starting of Bharat’s (not India’s) agriculture sector.
Starting of agriculture sector means huge demand in fertilizers, textile and farm equipment. Hence, companies dealing in the above said business is likely to post great profits in the next quarter. Hence your holding period of such companies should be July through December (6 months).
What to buy after monsoon?
Monsoons in India usually last from July through September. And from October the festive season of Navratri, Durga Puja, Dhan Teras and Diwali starts. This is the time to invest in companies that trade in automobile and real estate business.
Indians tend to buy new things during this time of the year as it is considered auspicious. History has it that maximum automobile sales and real estate sales has happened during this time. Hence, it is important to note that one can start investing in these companies from September (end of monsoon) and keep the investment through March. This is because these companies are likely to post robust results post festive season.
What to buy during and after festive season?
There are two sectors which are negatively effected the most during monsoons – Textile and Cement stocks. During monsoons, people usually don’t go out shopping until and unless there is a huge sale. On the other hand, during monsoon real estate is at the lowest point, hence, cement stocks (which directly effected by real estate) do not see handsome sales.
Due to this reason there is always a chance that they will post weak numbers after monsoons in December quarter, thus, triggering a downfall in stock prices. It is during this time that one can accumulate cement and textile stocks.
The best month to book profit in such kind of stocks is during the March quarter as the festive season would have improved the sales and profit and thus would have lifted the sentiments.