The Hindu Business Line : Fear of less subsidy knocks down fertiliser stocks

Mumbai, Jan. 8 Fertiliser stocks seem to have taken a beating today in the markets with the announcement that the Budget may yield Rs 19,000-crore less fertiliser subsidy. Most of all the fertiliser stocks were trading the day in red.

Chambal Fertilisers and Chemicals was down 5.07 per cent, Deepak Fertilisers and Petrochemicals Corporation Ltd dipped 6.02 per cent, while both Godavri and Tuticorin Alkali Chemicals and Fertilisers Ltd tanked 4.94 per cent.

Others who ended the day in red were Khaitan Chemicals and Fertilisers Ltd (down 9.97 per cent), Gujarat State Fertilisers and Chemicals Ltd (down 6.90 per cent), Mangalore Chemicals and Fertilisers Ltd (down 4.96 per cent), and National Fertilisers Ltd (down 4.99 per cent).

Allocations

The Finance Ministry is understood to have finalised a budget allocation of only Rs 31,000 crore for the fertiliser subsidies and concessions for this year. The figure will be finalised by the month end, but could end up once again under-estimated in the Budget of 2008.

“The market seems to have sensed the impact of the Finance Ministry’s statement in advance which is why the fertiliser stocks have been hit the way that they have today. The investors seem to be building their positions regarding fertiliser stocks by selling it off,” said Mr Sanjay Someshwar, sub-broker, Ventura Securities.

‘Sentimental impact’

Market watchers are anxious but they say that they are not too concerned about these stocks as they say a large chunk of the revenue comes from non-fertiliser business, which has been a systematic strategy to de-risk their business.

“What we are seeing now is a sentimental impact of what the Finance Minister announced. Subsidies will continue to be an issue with these companies who require a lot of working capital. These stocks have been moving up fairly high for sometime and now this sector seems to be going through a correction of sorts. We should take this correction in its stride and not get panicked,” said a Chief Investment Officer with a fund house in the city.

But Mr R. Balagopal, Vice-President of Fedex Securities Ltd, is optimistic about the fertiliser stocks. He says that with a long term view in mind he thinks that these stocks will pick up, with the Government thinking of reforms to help the agriculture sector.