Six fertiliser stocks trade in green with FACT share price zooming over 14%; Here’s why

Stock market today: Shares of fertilisers companies have been trading in the green zone on Wednesday following the news that the Cabinet is likely to adopt the PM PRANAM SCHEME (Promotion of Alternate Nutrients for Agriculture Management Yojana) in the meeting today.

According to media reports, the government would focus lowering subsidies for chemical fertilisers through this programme. The major goal of the programme is to promote the balanced application of fertilisers alongside bio and organic fertilisers.

The main objective of the programme is to reduce the cost of chemical fertilisers' subsidies, which is projected to rise to ₹2.25 lakh crore in 2022–23, or 39% more than the ₹1.62 lakh crore figure from 2021, according to media reports.

Shares of Fertilisers and Chemicals Travancore Ltd (FACT) is trading near its 52-week level (up over 14%), Coromandel International Ltd (up over 1%), Deepak Fertilisers & Petrochemicals Corporation Ltd (up nearly 2%), Rashtriya Chemicals & Fertilizers Ltd (up over 2%), Gujarat State Fertilizer & Chemicals Ltd (up over 3%), and Chambal Fertilisers & Chemicals Ltd (was up nearly by 1%) were all trading in green on Wednesday's trade.

Further, shares of fertiliser stocks have been on investors' radar following last week's monsoon report from the India Meteorological Department (IMD), which forecast a typical southwest monsoon.

But this time, there is a chance for El-Nino circumstances, thus there is still some doubt about whether IMD projections would come true.

According to an analyst, India is going to be self reliant in fertiliser within 2-3 years. Fertilisers and Chemicals Travancore is going to be one stock helping India to achieve its target. Further, he stated that due to disturbance in supply chain, raw materials are at high cost. Local requirement looks like higher side in this monsoon as export of crop increased after Ukraine war in European market.

Factors helping fertiliser companies

According to Vinit Bolinjkar, Head of Research, Ventura Securities Ltd, in the past year, the fertiliser industry experienced record completions in terms of investment value and capacity. A total of 3,260.8 thousand tonnes of conventional granular fertiliser manufacturing capacity and 73,000 litres of liquid fertiliser capacity were added. These additions far surpassed the capacity added in the previous two years and the highest since 2010-11. The industry is expected to continue its growth trajectory with an additional 1,864.4 thousand tonnes of capacity planned for the next two financial years, bringing the total installed manufacturing capacity to 58.4 million tonnes by 2024-25.

The industry's high utilisation levels, with major fertiliser manufacturers operating above 90% capacity in 2020-21, suggest that the significant capacity additions are unlikely to have an adverse impact. The increased production from these new capacities is expected to reduce the need for expensive fertiliser imports, potentially lowering the import share by one to two percentage points.

Over the past five years, a majority of project investments in the fertiliser industry focused on the urea segment. From 2017 to 2022, manufacturers added a total production capacity of 8,473.2 thousand tonnes, with more than 95% of this capacity concentrated in conventional urea production. Additionally, 73,000 litres of nano-urea production capacity were added, which is equivalent to approximately 6,570 thousand tonnes of conventional urea (considering that 500 ml of urea equals 45 kg of conventional urea).

Technical Views

According to Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One, Fertilisers and Chemicals Travancore shares are seeing a major price volume breakout expect the upmove to continue towards 420, immediate support is at 360. Meanwhile, Coromandel International stock is trading in a range , 920 - 980 next directional move can only be seen on a range breakout from mentioned levels.

Further, Bhosale stated that Deepak Fertilisers & Petrochemicals Corporation shares has witnessed some positive momentum and the counter and prices may extend towards 600, immediate support is at 550.

In case of Rashtriya Chemicals & Fertilizers, a trendline breakout is visible on the daily chart according to the analyst. It seen with good increase in volume, can expect further extension of upmove and dips could be bought , 110 is the support 118 is the resistance.

Gujarat State Fertilizer & Chemicals shares, after a recent correction prices and after forming a base on strong supports are showing signs of resumption of upmove, 155 is the immediatee support whereas 175 is resistance, said Bhosale.

For Chambal Fertilisers & Chemicals stock, the analyst witness strong volumes in this counter however price momentum is not there, 270 - 290 is the immediate range.