Fertiliser stocks gain momentum ahead of rains

Fertiliser stocks gain momentum ahead of rains (updated - 15 June 2010)
With seasonal rain just round the corner and the weather bureau forecasting a normal monsoon this year, fertiliser stocks are gaining popularity with investors.

Experts tracking the sector say these stocks come in vogue during this time of the year, as the immediate period before the monsoon is the peak season for sales. Fertiliser companies have a good dividend paying record, they add.

Stocks such as Deepak Fertilizers & Petrochemicals Corporation, Rashtriya Chemicals &Fertilizers, National Fertilizers and Chambal Fertilisers & Chemicals have all outpaced the benchmark 30-share Sensex of the Bombay Stock Exchange in the current calendar year.

While the Sensex has lost over two per cent in the current calendar year, stocks like Deepak Fertilizers and Rashtriya Chemicals have gained by 1315 per cent. National Fertilizers, meanwhile, has surged over 66 per cent in the past six months (see table).

Weather plays an important role in determining the fortunes of fertiliser companies. The more the rainfall, the greater the demand for fertiliser.

The India Meteorological Department (IMD) has forecast anormal monsoon across the country this year,saying the total rain during the June-September season would be 98 per cent of the long-period average.

A section of analysts, interestingly, take the weather department forecast with a pinch of salt and advise caution while investing in stocks based on seasonal flavour.

“Last year, the forecast went haywire due to the failure of the southwest monsoon, which impacted agriculture across the country,” says an analyst with adomestic brokerage. Last year ended with 23 per cent deficient rainfall, while IMD had forecast anormal monsoon. The southwest monsoon officially begins on June 1 and ends on September 30.

The government recently also came out with a NutrientBased Subsidy Policy for fertilisers, wherein more efficient companies will be better placed to mitigate the impact of higher volatility, with an ability to control their production costs.

As mentioned earlier, fertiliser companies also have a good dividend-paying record. In May, Deepak Fertilizers announced a dividend of 45 per cent or Rs 4.50 per share. Chambal Fertilizers and National Fertilizers also announced dividend of Rs 1.90 and Rs 1.05, respectively.

Stock Name	Dec' 09	June' 10	% Change
National Fertilizers	64.10	106.65	66.38
Deepak Fertilizers	105.60	121.35	14.91
Rashtriya chemicals	70.10	79.85	13.91
Chambal Fertilizers	57.90	60.30	4.15
Sensex	17,465.00	17,065.00	-2.29
Tata Chemicals	322.20	310.75	-3.55
Nagarjuna Fertilizers	32.45	28.60	-11.86

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