The traders were excited over the weekend. A rally was definitely on the cards, especially when it was clear that lockdown 5.0 is in reality, unlock 1.0 in disguise. The positive reaction was a given. However, it's the magnitude of the rally that caught investors most by surprise.

Sensex closed with a gain of 2.71% at 33,303.52 while Nifty moved 245 points up at 9,826.15. Both the index at one point gained more than 3% before falling from the top.

The day was largely spent celebrating the start of unlocking. It would be early to call it a trend though as very little has changed on the ground to make a convincing case for bulls.

Consider manufacturing PMI, which was abysmally low for the second consecutive month. PMI for May came in at 30.8 in May as opposed 27.4 in April. PMI above 50 signals expansion and the current data shows how far we are from it.

India's real GDP growth of 3.1% YoY in the previous quarter is also a cause of a lot of heartburn. The GDP growth in the first quarter of this year is expected to drop to zero or below as the lockdown was far more serious in April and May.

Locust attack: Safe for now but can't stay off guard

An emerging report suggested that the locust attack is unlikely to affect agriculture. It has brought relief to those harping over the potential impact of the locust attack.

In India, Rabi season ends in May while Kharif sowing doesn't start before July. Thus, farmers currently do not have major standing crops at the risk of attack. However, Horticulture (fruits and vegetables) crops are at risk of a washout in Rajasthan, Maharashtra, MP, UP, and Gujarat though. These states cumulatively contribute 38% to India’s 312MMT of horticulture production.

Apart from horticulture products, locust attacks may impact sugarcane crops in U.P. January–March is the sugarcane sowing period in UP. The state constitutes ~45% to the normal sugarcane sowing area of India.

Key Takeaways:

In India, locust attacks are normal during July–October. The early arrival of locusts this year is a blessing in disguise for standing crops. However, the outbreak has to stop before the arrival of monsoon rainfall when the locusts would mature and breed.

Infestation if not controlled, would pose a threat to Kharif sowing. As a reference, Africa is currently witnessing its second wave of locust attacks. This attack has been 20 times worse than the swarm that made its way through the region two months ago.

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