Agriculture-related stocks still on fertile ground

Our Bureau Chennai | Updated on January 20, 2018 Published on May 17, 2016

Agri stocks

Normal monsoon prediction boosts sentiments for most of them

Shares of companies focusing on agriculture such as agrochemicals, pesticides and other special chemicals have been on the rise, ever since India Meteorological Department predicted good monsoon this year.

Shares such as Meghmani Organics (pesticides and pigments), Monsanto India, Advanta and Bayer Cropscience (seed and crop protection), Dhanuka Agritech, Rallis India and Insecticides India (herbicides, insecticides and fungicides) have gained 9-56 per cent in a month’s time.

According to analysts, after failure of monsoon in successive years, things seem to look promising for the sector with the IMD and Skymet forecasting rainfall in 2016 to be 106 per cent and 105 per cent of the long period average.

Besides, the central government’s special focus on boosting agriculture income for the rural folk has also improved sentiment for the sector.

Budgetary boost

An analyst with a Mumbai-based broking firm said the Budget with special emphasis on agriculture has turned around sentiments for this sector. Prediction of normal monsoon has further boosted the confidence of sector analysts, he added.

According to a report from HDFC Securities, irrigation projects worth ₹5,840 crore (against ₹5,300 crore for FY16 Budget Estimates) have been budgeted under the Pradhan Mantri Krishi Sinchai Yojana (PMKSY). Under this scheme, 28.5 lakh hectares of land will be irrigated.

Fast-tracking 89 stalled irrigation projects under the Accelerated Irrigation Benefits Programme will help irrigate 80.6 lakh hectares. These projects require expenditure of ₹17,000 crore next year and ₹86,500 crore in the next five years, added HDFC Securities.

But analysts also caution investors on buying these stocks just on a single factor — monsoon. “It will take two to three quarters for the companies to see the benefits of monsoon. So, instead of buying the theme, it is advisable for investors to identify fundamentally good stocks in the sector,” Ramesh Chordia, an independent analyst, said.

Besides, if any other adverse global or domestic development emerges, then these stocks may not hold water, he added.

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Published on May 17, 2016
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