The Hindu Business Line : Tea stocks gain on demand-supply mismatch

Cuppa is once again hot on Dalal Street. The tea stocks have quietly moved up between 20 and 35 per cent in the past one month as improvement in domestic tea prices became visible.

The exports market, particularly of Northern Indian varieties (Assam, Dooars and Darjeeling), has also been showing signs of mark-up.

Substantial shortfall

According to Mr Kamal Baheti, Director of McLeod Russel, world’s biggest tea producer, the quarter to December 31, 2007, should prove to be the best in recent years.

“This quarter has seen a price rise of Rs 10 a kg against Rs 7 in the third quarter of 2006,” he added. The exports are also fetching better value smothering the losses on account of the rupee appreciation against the dollar.

There is substantial shortfall in the availability of tea for domestic consumption, estimated to be growing annually by around 3 per cent. “The local shortfall in output, according rough estimates, could be in the region of 20 million kg at the end of the calendar year, while the demand growth suggests an expansion of about 20 to 25 million kg,” he said.

Upward bias

Industry experts said that the year-end carryover stock is lower than usual and this is now being reflected in the auction price trend too.

“Internationally, Sri Lanka’s production is estimated to be lower by around 20 million kg. Though Kenya’s production is stated to be normal, there is an overall demand-supply mismatch at the international level. This has already placed an upward bias in the prices,” Mr Baheti said.

Industry insiders and analysts seemed to think that the commodity cycle for tea might have seen the worst go by and the one-year outlook appears to be good. According to Mr Rajesh Agarwal, Director research of CD Equisearch, the realisations for tea companies are going up.

On the domestic front, he felt that the present trend might continue in the next few quarters. However, regarding export realisations, he was not very optimistic as he felt Kenyan supplies could become a spoilsport for an Indian tea party.

McLeod Russel on Thursday closed at Rs 86.25, up around a per cent. The stock has one more trigger in the new jatropha cultivation venture. However, Warren Tea was the biggest gainer, up over 7 per cent, followed by Dhunseri (5 per cent), Assam Co (5 per cent) and Jay Shree Tea (1.29 per cent).

More Stories on : Stock Markets | Stocks | Tea

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page