Should you hold rice mill stocks amid export curbs?

Last week, the government imposed 20 per cent export duties on various grades of rice like non-basmati, unmilled, semi-milled or totally milled, and husked brown. 

A blanket ban on broken rice, too, was imposed as domestic supplies dwindled, after below-average monsoon season.

However, parboiled and basmati rice were exempted from export duties.

With this, India, which accounts for 40% of the global rice trade, stands to lose its world’s market share to rice producing global peers like Thailand, Vietnam, Pakistan and Myanmar. 

India exports rice to at least 164 countries. Iran was the biggest overall importer of Indian rice in FY22, accounting for $855.7 million. China was the biggest recipient of broken rice in FY22, which accounted for $480.3 million. 

Therefore, analysts expect rice exporting companies to face the heat in the near-term. 

Gaurang Shah, Head, Investment Strategist, Geojit Financial Services, protectionist measures are momentary in nature. One must 'hold’ companies with sound fundamentals. 

From an investment viewpoint, analysts suggest investors to avoid rice-mills stocks for another quarter.

Speaking to Business Standard, AK Prabhakar, Head of Research, IDBI Capital says, investors need to expect another quarter of correction. But he does not see rice companies to make profits, and offers a caution on rice stocks until the Ukraine war is over.

On the bourses, shares of LT Foods, Kohinoor Foods, Chaman Lal Setia Exports have declined in the range of 1 per cent to 10 per cent. In comparison, frontline indices Nifty50 and the S&P BSE Sensex have gained nearly 1 per cent each, during the same period.

As regards today, India’s inflation numbers and macro data will guide markets today.

Globally, US inflation numbers, UK unemployment report and OPEC’s monthly report will also be tracked.

Rupee movement, FII flows and crude oil prices will continue to steer investor sentiments on Tuesday.