Fertilizer Stocks Tank Up To 8% As Investors Book Profits Amid Uncertainty Over GST Relief

Fertilizer stocks on Friday tanked up to 8 per cent amid profit booking after surging as high as 20 per cent on Thursday. This came after the sector witnessed a sharp rally in the last few sessions on the back of expectations of normal monsoon and expenditure on agriculture in the upcoming union budget.

Chambal Fertilisers & Chemicals shares recorded a sharp decline of 7.7 per cent to its day’s low of Rs 515.05 on the BSE while other stocks like National Fertilizers, Paradeep Phosphates, and Rashtriya Chemicals & Fertilisers fell up to 7 per cent.

Shares of Deepak Fertiliser & Petrochemicals, GNFC, and Coromandel International fell by 5 per cent, 6.5 per cent, and 5.5 per cent respectively.

In the last few sessions, the fertilizer stocks were boosted by reports of a proposal to remove Goods and Services Tax (GST) on fertilizers. The first GST Council meeting on the Modi Government 3.0 is scheduled to be held on Saturday, June 22, where a decision may be taken to remove fertilizers from within the ambit of GST.

Prashanth Tapse, Senior VP Research Analyst at Mehta Equities says, fertilizer stocks are trading down witnessing profit booking attempts post yesterday’s rally. “Markets were expecting 100 per cent exemption for fertilizers sector from GST but it may not be true, hence stocks are trading down in red. All eyes will be on the GST Council meeting tomorrow,” he said.

The rally was also driven by market optimism over the MSP hike. Recently, the Union Cabinet announced the minimum support price (MSP) for 14 Kharif-season crops, including paddy, ragi, bajra, jowar, maize, and cotton.

Atul Parakh, CEO of trading platform Bigul says, “The decline could be a symptom of a broader market correction, dragging down fertilizer stocks along with others in a wave of risk aversion. In the absence of fresh catalysts or updates on company performance, investors might be adopting a wait-and-see approach, causing a pullback in the sector.”

However, investors anticipate that the rise in MSP will enhance farmers’ purchasing power, thereby boosting their investment in agricultural inputs like fertilizers.

The MSP hikes, estimated to have a financial burden of Rs 2 lakh crore for the government and result in an estimated gain of Rs 35,000 crore for farmers compared to the previous season, are aimed at significantly boosting farmers’ incomes and improving their economic conditions.

Market analysts are positive on fertilizer stocks, stating that the sector is showing early signs of leadership within the high-beta sector after seeing a mixed performance in recent years.

Brokerage firm Nuvama Institutional Equities says the fertilizer sector is preparing for a big rally as there is bullish structural confirmation in the long-term charts of select fertilizer stocks that are catching strong attention.

“The basket of fertilizer stocks has formed higher tops and bottoms on the medium-term charts, indicating a probable trend change and resumption of the uptrend. The overall outlook appears positive, suggesting a major uptrend will unfold in the coming years, with a new sector likely to emerge from the PSE space,” the brokerage said.

Nuvama has issued buy recommendations for three fertilizer stocks including Chambal Fertilisers & Chemicals, National Fertilizers, and Rashtriya Chemicals & Fertilizers (RCF).