{"id":12816,"date":"2022-12-29T09:52:12","date_gmt":"2022-12-29T04:22:12","guid":{"rendered":"https:\/\/univest.in\/blogs\/?p=12816"},"modified":"2022-12-29T11:47:46","modified_gmt":"2022-12-29T06:17:46","slug":"fertilizer-stocks-deliver-outsize-gains-for-investors-this-year","status":"publish","type":"post","link":"https:\/\/univest.in\/blogs-2\/fertilizer-stocks-deliver-outsize-gains-for-investors-this-year\/","title":{"rendered":"Fertilizer stocks deliver outsize gains for investors this year"},"content":{"rendered":"

Many of us live in cities and towns and don\u2019t fully recognize how much our modernizing Indian economy depends on agriculture. Even today, an estimated 58% of India\u2019s workforce works in this sector. As one of the most populous countries in the world, ensuring food security is a priority in India. The agriculture and fertilizer sectors are consequently a major focus in Indian government policy. The agrochemicals industry is essential to improving crop production and protection. There are many large and small players in the Indian fertilizer industry, and over the past year, most of them delivered stellar results to investors.<\/p>\n

The agrochemicals industry is essential to improving crop production and protection. There are many large and small players in the Indian fertilizer industry, and over the past year, most of them delivered stellar results to investors. In the past month, we witnessed significant volatility in some of these stocks.<\/p>\n

Anticipating a favourable performance, fertilizer stocks surge <\/strong><\/p>\n

FACT jumped over 80% and Madras Fertilizers by 36.1% over the past month. Among the larger fertilizer companies, FACT has gained more than 100% over a year. Except for Chambal Fertilizers, all other stocks delivered healthy returns this year, including RCF and GNFC, which grew more than 20%<\/p>\n

\"Fertilizer<\/p>\n

The recent run-up in fertilizer stocks can be attributed to a few factors. Many analysts believe that the market is anticipating that the Centre will announce subsidies on fertilizers in the forthcoming Union Budget. In addition to this, there will be an export ban or increased duty on fertilizers from Russia, impacting global prices. Russia\u2019s imposition of an export tax on fertilizers is likely to come into effect from January 1, 2023. It plans to set the export tax on all types of fertilizers at 23.5%, with a cut-off price of $450 per tonne.<\/p>\n

The Indian government has also proposed a change in the policy of gas supply to fertilizer companies. It requires fertilizer companies to pay for at least 40% of gas under spot buying. Gas is the primary fuel used in fertilizer production. The Oil Ministry estimates spot gas prices to come down by up to 15% under the new mechanism. GAIL will act as the nodal agency to supply pooled gas to the fertilizer sector.<\/p>\n

\"Fertilizer<\/p>\n

Some of the smaller fertilizer stocks have done much better than their larger counterparts. Madhya Bharat Agro, Madras Fertilizers and Krishna Phoschem gained more than 100% this year, with a standout performance of 500% gains by Madhya Bharat Agro. National Fertilizers and GSFC were the laggards of the sector.<\/p>\n

For the past three quarters, the fertilizer industry faced margin pressure due to a rise in input costs. But thanks to a normal monsoon in India this year, fertilizer stocks have recently boomed. Rising Covid cases in China, while in distress to the global supply situation, could also prove to be a boon to Indian fertilizer companies.<\/p>\n

Another supporting factor is the correction of raw material prices in the international markets, which is expected to aid the performance of these companies in the coming quarters. The prices have corrected for key input raw materials and fertilizers such as Phosphoric acid (30%), Sulphur (49%), Di-ammonium Phosphate [DAP] (39%), and Urea (34%).<\/p>\n

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