There is a looming fear of an El Nino in Indian markets.

It has
received high amount of coverage in the press also. This could
impact the prospects of growth in earnings as food infation
would rise and to rein in infation, the Reserve Bank of India
might maintain frm interest rates. But what eactl! is El
Nino" #ow El Nino is caused" $nd how critical it is in Indian
contet especiall! given the increasing optimism of a sta%le
government at the centre.
$n El Nino is a temporar! climate change of the &acifc ocean
in the region around the e'uator. The surface of the ocean
warms up %! a few degree (elsius, which can have huge
impact on world)s climate.
The basics
a) Cause of El Nino
*ostl!, it is o%served that the wind %lows strongl! from east
to west along the e'uator in the &acifc. This actuall! creates
ecess water in the western part of the pacifc. In the eastern
part of the pacifc, deeper water gets pulled up from %elow to
replace the water that veered towards the west. It is
important to understand that the eastern part of the pacifc
has cold water, while the western part has warmer water. +o,
in an El Nino situation, the winds move, some water
In an El Nino, the winds pushing that water around get
weaker. $s a result, some of the warm water piled up in the
west slumps %ack down to the east, and not as much cold
water gets pulled up from %elow. Both these tend to make the
water in the eastern &acifc warmer, which is one of the
hallmarks of an El Nino.
But it doesn,t stop there. The warmer ocean then a-ects the
winds..it makes the winds weaker/ +o if the winds get weaker,
then the ocean gets warmer, which makes the winds get
weaker, which makes the ocean get warmer ... this is called a
positive feed%ack, and is what makes an El Nino grow.
So what makes it stop growing?
The ocean is full of waves, %ut !ou might not know how man!
kinds of waves there are. There,s one called a Ross%! wave
that is 'uite unlike the waves !ou see when !ou visit the
%each. It,s more like a distant cousin to a tidal wave. The
di-erence is that a tidal wave goes ver! 'uickl!, with all the
water moving prett! much in the same direction. In a Ross%!
wave, the upper part of the ocean, sa! the top 011 meters or
so, will %e leisurel! sliding one wa!, while the lower part,
starting at 011 meters and going on down, will %e slowl!
moving the other wa!. $fter a while the! switch directions.
Ever!thing happens ver! slowl! and inside the ocean, and !ou
can,t even see them on the surface. These things are so slow,
the! can take months or !ears to cross the oceans. If !ou had
the patience to sit there while one was going %!, !ou,d hardl!
notice it2 the water would %e moving onl! 03011th of walking
speed. But the! are large, hundreds or thousands of
kilometers in length 4not height/ Remem%er, !ou can hardl!
see them on the surface5, so the! can have an e-ect on things.
$nother wave !ou rarel! hear a%out is called a 6elvin wave,
and it has some characteristics in common with Ross%! waves,
%ut is somewhat faster and can onl! eist close to the e'uator
4sa!, within a%out 7 degrees of latitude around the e'uator5.
El Ninos often start with a 6elvin wave propagating from the
western &acifc over towards +outh $merica. &erhaps !ou saw,
on the T8 news, the movie 4produced %! 9&:5 for the El Nino
of 0;;<3;=" It showed a whitish %lo% 4indicating a sea level
some centimeters higher than usual5 moving along the
e'uator from $ustralia to +outh $merica. That,s one of the
hallmarks of a 6elvin wave, the earl! part of the El Nino
process.
>hen an El Nino gets going in the middle or eastern part of
the &acifc, it creates Ross%! waves that drift slowl! towards
southeast $sia. $fter several months of travelling, the! fnall!
get near the coast and refect %ack. The changes in interior
ocean temperature that these waves carr! with it ?cancel out?
the original temperature changes that made the El Nino in the
frst place. I,m %eing deli%eratel! vague here %ecuase it,s
complicated2 look at the ?@or @urther Reading? link or the
?*ore Technical Eplanation? link for more information. The
main point is that it shuts o- when the these funn! interior.
ocean waves travel all the wa! over to the coast of $sia, get
refected, and travel %ack, a process that can take man!
months.
What efects does it have?
$ strong El Nino is often associated with wet winters over the
southeastern A+, as well as drought in Indonesia and
$ustralia. 6eep in mind that !ou aren,t guaranteed these
e-ects even though there is an El Nino going on2 %ut the El
Nino does make these e-ects more likel! to happen.
ow long does it last?
$ strong El Nino can last a !ear or more %efore conditions
return to normal. If !ou read the %it a%ove a%out Ross%! and
6elvin waves 4!ou did, didn,t !ou"5 then !ou know that it lasts
more or less as long as it takes the interior.ocean waves to
travel all the wa! over to the coast of $sia, get refected, and
travel %ack. Bou can also look at the #istorical El Nino
section, which has a plot showing the last C1 !ears of El
Ninos, and Dudge for !ourself.
ow often do we get them?
El Ninos happen irregularl!, %ut if !ou want to impress people
at cocktail parties, !ou might mention that we usuall! get one
ever! three to seven !ears. Note the word ?usuall!?E
sometimes the! turn up more fre'uentl!, sometimes less. Bou
can also look at the #istorical El Nino section, which has a
plot showing the last C1 !ears of El Ninos, and Dudge for
!ourself 4deDa vu5.
ow well can we predict El Nino?
Fn average, comple computer models designed to predict El
Nino can successfull! do so 0G to 0= months in advance.
#owever, it seems to var! %! episode2 sometimes El Ninos are
predicted 'uite well, with plent! of advance notice from the
models, while other times the! are predicted poorl!, with the
models not picking them up until the El Nino has alread!
started.
The !ndian conte"t
The much talked.a%out El Nino, which ma! a-ect India,s
+outh.>est monsoon, ma! hit the @B07 HI& growth rate, push
infation higher and has the potential to slow down the %ull
part!, sa! anal!sts.
El Nino impacts the atmosphere and increases temperature,
which could further disrupt rainfalls. The Reserve Bank of
India has also warned that this adversit! can impact the !ield,
which could further trigger the infation rate a%ove =.7J and
ma! result in hiking rates further, which could impact the
India Inc investment c!cle and put %rakes on the growth rate.
?In m! view, the industr! which has eposure to agriculture
and infrastructure segments would get directl! impacted.
(ompanies which are in fertiliKer and other agri.related
%usinesses such as &I IndustriesB+E G.<1 J, (oromandel
InternationalB+E .1.G< J, Ba!erB+E C.G; J (ropsciences,
etc, would %e on impact line,? said Tushar &endharkar, E'uit!
+trategist, Right #oriKons @inancial +ervices. ?Those
companies dealing in infrastructure segment, such as I:L@+
Transportation, IRB Infra, 9a!pee InfratechB+E 0.C= J, etc.,
could also face dela! in completion of proDects,? he added. $
siKa%le impact on agriculture and infrastructure segment
would also drag the predicted HI& growth, which could
further o-set the recent stock market rall!, he concluded.
El Nino is an oceanic phenomenon, which emerges after a gap
of ever! C to < !ears. >arm water temperature develops
around the &acifc coast of +outh $merica, leading to
fuctuating weather across &acifc Fcean. +ea surface
temperatures increase a%ove normal %! 1.7 degree.
$lthough it ma! %e too earl! to conclude an!thing, %ut
research frms have alread! started proDecting El Nino,s
impact on India. There is M1J likelihood of India receiving
%elow normal monsoon rains this !ear %ecause of an El Nino
phenomenon developing in the &acifc Fcean, 'uoting +k!met,
a Ielhi.%ased private sector weather forecaster. In a forecast
for the 9une.+eptem%er rain! season released on Tuesda!,
+k!met said monsoon in India is likel! to %e ;M per cent of its
long period average 4:&$5, which means the countr! will get
=;N mm of rainfall during the four months.
#n !n$ation
$ strong El Nino in India would trigger lower production of
summer crops such as rice, sugarcane and oilseeds. In G11;,
El Nino turned Indian monsoon patch!, leading to the worst
drought in nearl! four decades which helped push glo%al
sugar prices to their highest in around C1 !ears.
It could %e %ad news for Indian agriculture conditions in the
&acifc Fcean seem to %e increasingl! favouring the onset of
an El Nino this summer, +*( said in a report. The weather
department would issue it its monsoon forecast in the last
week of $pril. #owever, the clarit! on El Nino conditions
would emerge latest %! 9une. *onsoon usuall! arrives over
the Indian su%continent through the southern state of 6erala
%! end.*a! or the frst week of 9une, the report added. Earlier
this week, +ingaporean %ased %rokerage frm IB+ said
infation in India ma! Dump to over =.7 per cent and HI&
growth ma! slip to 7 per cent in the current fscal if the much.
feared El Nino threat pla!s out this !ear. The El Nino entails
unusuall! warm temperatures which disrupt rainfalls, while in
the domestic contet, it has %een o%served that the incident
has coincided with weak +outhwest monsoons. ?El.Nino could
push the (&I 4 consumer price inde5 infation o- the RBI,s
glide path and up to = per cent %! 9anuar! 07. Even a
moderate 7 per cent increase in food inde could lift headline
infation to =.7 per cent,? the IB+ noted said.
!mpact on %&' %rowth(
$fter formation of the new government, most anal!sts epect
India,s HI& growth to %ounce %ack and head higher from the
current levels. Nut, if El Nino pla!s out as epected, there is a
high change that it will hit the @B07 HI& growth rate. India,s
growth is epected to improve in G10M, the International
*onetar! @und said last week. In G10C, India,s growth rate
stood at M.M per cent.
@or India, real HI& growth is proDected to strengthen to 7.M
percent real HI& growth is proDected to strengthen to 7.M per
cent in G10M and N.M per cent in G107, assuming that
Hovernment e-orts to revive investment growth succeed and
eport growth strengthens after the recent rupee
depreciation,? the I*@ report said.