Fertiliser, agrochemical stocks rally as monsoon arrives early

Shares of fertiliser and agrochemical companies were among the top gainers on the BSE on Monday, after monsoons progressed earlier than expected in various parts of the country.

Analysts said investors are hoping that the good rainfall could benefit the agriculture sector, which in turn would boost demand for their products.

Fertilisers & Chemicals Travancore (FACT), Nova Agritech, National Fertilizers, Rallis India and Paradeep Phosphates rose between 10% and 15% at closing.

“We have seen the shift in global weather conditions from the start of 2024, and we are turning from El Nino, which was seen last year, to La Nina, which is known to bring good rains in the Asian subcontinent,” said Prashant Biyani, vice president-institutional equity research at Elara Capital. “This will help boost the demand for agri inputs, including agrochemicals and fertilisers.”

He is bullish on Coromandel International, Bayer CropScience, Rallis and Dhanuka Agritech for the next 9-12 months.Biyani said last year the demand for kharif and rabi crops was ‘abysmally low’ due to the deficit monsoon, which may be reversed this year.In India, kharif crops like rice, maize, millet, and sugarcane are sown between July and October and harvested from September to October. Rabi crops like wheat, barley, oats, gram, and mustard are sown between October and November and harvested from February to April.Stocks of big fertilisers and agrochemical companies like Rashtriya Chemicals and Fertilizers, Coromandel International, Chambal Fertilisers, NFL and Rallis India returned up to 23.8% in 2024 so far, against the 7% returns of the benchmark Nifty index.

Analysts see further upside in these stocks this year.

“The fertiliser sector has not moved for the last 2-3 years and now, as we move past the heatwaves towards rain this year, we are seeing a rally in these stocks,” said Vikram Kasat, head-advisory at Prabhudas Lilladher. “The government is also planning to revive closed fertiliser plants in Talcher, Ramagundam, Gorakhpur, Sindri and Barauni in the next few years, to revive the industry.”

Kasat said the BJP government’s victory in the elections may lead to the continuation of farmer-friendly policies such as PM-Kisan, Aatmanirbhar Bharat, urea subsidy and PM-Garib Kalyan Yojana.

Biyani said that the fertilisers and agrochemicals sector is an example of ‘rising tides lifting all boats’.

“For the entire year, we are positive on this sector, and would prefer domestic branded companies over other companies which have more international exposure as La Nina may bring patchy rains and drought-like conditions in the South American region,” said Biyani.

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