Agri related stocks rally;Chambal Fertilisers, Shakti Pumps hit 52-wk highs

Madras Fertilizers, FACT, RCF, Escorts, Shakti Pumps, Chambal Fertilisers and Roto Pumps were up 3% to 8% on the BSE.

Shares of agriculture-related stocks were in focus with Chambal Fertilisers & Chemicals, Escorts and Shakti Pumps (India) hitting their respective 52-week highs on expectations of a government thrust to drive sector.

Madras Fertilizers, Fertilizers & Chemicals Travancore (FACT), Rashtriya Chemicals & Fertilisers (RCF), Chambal Fertilisers & Chemicals and Deepak Fertilisers & Petrochemicals from fertilizers, Shakti Pumps (India) and Roto Pumps from pumps manufacturer and Escorts from the tractors were up in the range of 3% to 8% on the BSE. On comparison, the S&P BSE Sensex was up 0.44% at 34,252 at 10:06 am.

“Given government’s intent to double farm incomes, we expect agri input players to report strong growth in FY19, especially after this year’s Kharif season hit by Goods and Services Tax (GST). In irrigation, higher funds allocation by government will support growth. Falling subsidy and direct benefit transfer (DBT) implementation brighten prospects of fertiliser companies,” analysts at Edelweiss Securities said in result preview.

Meanwhile, early predictions by various weather forecasting agencies indicate normal Southwest monsoon this year. Skymet expects monsoon this year to be 100% of the long period average (LPA) with a model error of +/- 5%. The agency also expects that there is no possibility of a nationwide drought or deficient rainfall.

According to Emkay Global Financial Services, Q4FY18 is generally a seasonally weak quarter for the domestic Agrochemicals players.

The inventories are on the lower side, as the companies stayed away from channel filling in March’18. This is expected to result in better volume growth in FY19 due to lower channel inventories and prediction of normal monsoon this year, it added.