After a sharp rally in last few days, tea company shares witnessed profit-booking across the board in line with weak market trend on Thursday. The benchmark Sensex lost 151 points.

Tea company shares such as Harrisons Malayalam, Tata Global Beverages, Goodricke Group and Bombay Burmah were the toast of the market in the last few trading sessions as the overall output of the commodity is expected to be higher compared with last year.

The bumper Indian tea production comes on the back drop of a contrary picture emerging from overseas markets.

India's production in August was up by 3.5 per cent on year to 127 million kg, while exports jumped 15.2 per cent to 19.4 million kg, according to the Tea Board of India.

Despite higher production, tea prices are holding strong in the domestic market due to increase in demand.

Tea prices in the domestic e-auction were up at Rs 72 a kg in September against Rs 69 recorded in the same period last year.

Companies that have tea estates in North India may benefit the most as the crop in this region is estimated to be much better than the South.

EXPORT MARKET

As of August-end, tea output in the northern region has registered a growth of 38 million kg over last year.

This has enabled the country's production to grow by 33.7 million kg during January-August.

India, the second largest tea exporter after China, ships crush, tear, curl (CTC) tea variety mainly to Egypt, Pakistan and UK, and premium variety to Iraq, Iran and Russia.

Sri Lanka, one of the major competitors of India in the export market, reported a fall in output for the sixth consecutive month in September. Kenya is the other main competitor in the global tea market. Sri Lanka's tea production in September recorded 22.93 million kg (mkg) against 25.61 mkg in the same month last year. The output in the first nine months has slipped 1.3 per cent to 245.16 mkg from 248.27 mkg in the same period last year, due to adverse weather conditions.

According to latest reports, the Kenyan crop is estimated to be lower by 31.3 mkg, Indonesia by 8.5 mkg, and Uganda by 5.3 mkg. The average tea export prices in August were up by Rs 14 a kg to Rs 159 compared with last year.

“The realisation for tea companies from exports will be higher than projections this year as the rupee has depreciated sharply against dollar,” said an analyst.

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