Harvesting times for fertiliser firms

Fresh triggers after the note ban have helped fertiliser stocks not only gain lost ground but register good returns. Expectations of a decline in subsidy receivables in FY18 after the Union Budget, hopes of demand improvement following the UP elections, as well as talk of fast-tracking fertiliser reforms have helped these stocks gain in the past few month. With these gains, the one-year returns given by these stocks too have been phenomenal. Coromandel International, Chambal Fertilisers, GSFC, Tata Chemicals, Deepak Fertilisers, etc have gained 52-98 per cent in the past one year. There could be more gains ahead. This reversal in fortunes for fertiliser stocks in FY17 comes after three challenging years. The deficient monsoons, high raw material prices, elevated subsidy receivables, and policy stagnation had contributed to their underperformance earlier. While substantial improvement in the monsoon in 2016 provided the first trigger, falling prices of natural gas and those of MoP (muriate of potash), DAP (di-ammonium phosphate) and urea in 2016 (down up to 30 per cent in the last two years) supported the process. With the government maintaining a budgetary allocation of Rs 70,000 crore in FY18, expectations of subsidy receivables declining substantially have also increased. Nifty Trading Tips