India Pesticides' listing puts spotlight on agro-chem stocks. Time to buy?

The equity shares of India Pesticides listed on the bourses on Monday at Rs 360, a premium of 22 per cent over the issue price on the BSE, given healthy demand for its initial public offer and its presence in the fast-growing agrochemical space. READ HERE

The stellar listing's rub-off effect was visible on other fertiliser stocks as well. Shares of Basant Agro Tech, Zuari Agro Chemicals, Nagarjuna Fertilisers and Chemicals, Rama Phosphates, and Shiva Global Agro Industries were ruling higher in the range of 5 per cent and 14 per cent on the BSE at 12:50 PM. In comparison, the benchmark S&P BSE Sensex was up 0.6 per cent.

An analysis of the stock price movement of key sector players show that fertiliser companies have posted stellar returns, so far, in this calendar year. Deepak Fertilisers and Petrochemicals, for instance, has trippled on a year-to-date (YTD) basis while Chambal Fertilizers and Chemicals has surged 32 per cent and Coromandel International Limited 20 per cent.

Going-forward, analysts at Sharekhan expect high double-digit earnings growth for agri input companies over the next couple of years and hence have a positive view on the sector.

"Early monsoon, expectation of above-normal rainfall and higher MSPs leading to better crop prices would bode well for the upcoming kharif season, which in turn, would help domestic agrochemical companies report strong growth. Favourable sourcing policies of global companies (China Plus One factor) would further drive market share gains in the exports segment. The above factors and the vast opportunity from products going off-patent are expected to drive a 7-8 per cent growth annually for the Indian agrochemical industry," they said in a recent report.

Before taking the plunge, here's a look at what tech charts are signalling for the key players in the fertiliser segment.
 
Deepak Fertilisers & Petrochemicals (DEEPAKFERT)

Likely target: Rs 500 and Rs 540

Upside potential: 11% and 20%

After a sharp surge in June, the stock entered the overbought zone of Relative Strength Index (RSI) and witnessed profit-taking. Now, if the stock is able to close above Rs 450, absorbing the selling pressure, it may witness a breakout rally towards Rs 500 and Rs 540. The current trend has the support of Rs 370 and Rs 350 levels, as per the daily chart. CLICK HERE FOR THE CHART

 
Chambal Fertilizers & Chemicals (CHAMBLFERT)

Outlook: Consolidation phase

While a bearish divergence shows negative indication for the stock price, the price action reflects a positive bias, as per the daily chart. That said, even as the stock witneessed weakness in the overbought category, the horizontal consolidation has not broken on the downside. Thus, as long as the support of Rs 280 is held decisively, the upside bias will remain intact. The next breakout is seen above an active close of Rs 320 levels. CLICK HERE FOR THE CHART
 
Coromandel International (COROMAMDEL)

Likely target: Rs 1,000 and Rs 1,040

Upside potential: 11% and 15%

The "Higher High, Higher Low" formation suggests a positive upside in the short-term as the breakout above Rs 850 has built a positive strength in the stock. Going-forward, if the support of Rs 870 is defended aggressively, the stock is likely to gain strength and the upside bias may see a strong move towards Rs 1,000 and Rs 1,040 levels. CLICK HERE FOR THE CHART

Gujarat State Fertilizers & Chemicals (GSFC)

Outlook: Symmetrical triangle breakout above Rs 123

The formation of a "symmetrical triangle" shows breakout levels around Rs 123 mark. As long as the upper rising trendline, placed at Rs 112, is defended, the upside bias will remain intact. The RSI has made a positive crossover, suggesting the upward bias. CLICK HERE FOR THE CHART

 
Gujarat Narmada Valley Fertilizers and Chemicals (GNFC)

Likely target: Rs 420 and Rs 435 (after breakout above Rs 395)

Upside potential: 6% and 10%

While the current momentum is indicating a sideways movement, the stock needs to conquer the resistance of Rs 395 levels to see a rally towards Rs 420 and Rs 435, as per the daily chart. On the downside, the support stays at Rs 340 levels. The current price level is hovering around the 50-day moving average (DMA), attempting to build strength. CLICK HERE FOR THE CHART