Can agri-input companies continue to stay investor darlings?

Good rains and a pandemic pandemonium have made this sector appealing 

By the first week of March 2020, it had dawned on investors that COVID-19 was going to be more than China-centric. By April 1, the Sensex had the biggest quarterly fall in its history and so did the Nifty. The worst hit sector were financials, followed by automobile, real estate and metal. The walls were caving in, but there was one little corner that was holding out and even thriving — agri-inputs.

Agrochemical stocks such as UPL and PI Industries rallied on April 15, after the government announced new guidelines allowing agricultural activity to continue despite the initial 21-day lockdown. This sector was already on its way to recovery, thanks to generous rainfall. This abundance has benefitted the kharif crop and has helped fill reservoirs that will be beneficial to the rabi crop. Kedar Kadam, head of research, Cholamandalam Securities expects “new record output of food grain in 2020-21.” The prime beneficiaries of this would be agri chemicals and related suppliers.

The Indian agro-chemical market, largely trading in herbicides and pesticides, is expected to be worth $4.7 billion by FY25, at 8% CAGR. The prominent players in this sector are BASF, PI Industries, Bayer Cropscience and UPL, by revenue. Despite the role it plays, analysts are split on the long-term prospects of this sector, due to unpredictability of monsoon and intense competition.

Ten-year heat wave


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