Fertiliser companies’ shares firing on all cylinders, stocks zoom up to 20%: Check Budget 2023 and Russia factor behind rally

Fertiliser Stocks: Fertiliser companies’ shares seem to be firing on all cylinders as they rose up to 20 per cent on the BSE during Thursday’s trading session in otherwise weak market sentiment on the back of a healthy outlook and heavy volumes.

The buying sentiment in the fertiliser stocks could be attributed mainly because of the two main reasons, a likely subsidy on urea in the upcoming Union Budget 2023 and Russia’s imposition of export tax on the fertiliser, which is likely to come into effect from January 1, 2023.

Zee Business has learned that the government could announce an increase in subsidy on urea to provide relief to the farmers amid supply constraints due to global factors, according to a report by channel’s research team. This will benefit fertiliser companies that are facing margin pressure.

Urea is used as a fertiliser and feed supplement. Besides, it is also used as a starting material for manufacturing plastics and drugs.

Similarly, Russia plans to set its export tax for all types of fertilisers at 23.5% when the price is more than $450 a tonne, the Interfax news agency quoted Trade Minister Denis Manturov, according to a Reuters report. The imposition of the export tax is said to be effective from next year onwards.

Individually, Madras Fertilizers (MFL) shares have hit an upper circuit of 20 per cent to Rs 73.80 apiece, followed by Fertilisers & Chemicals Travancore (FACT) also rallied 20 per cent to Rs 223.6 per share, while National Fertilizers (NFL) jumped over 13 per cent to Rs 70.4 per share and Rashtriya Chemicals & Fertilizers (RCF) shares grew almost 10 per cent at Rs 144.8 apiece on the BSE intraday.

All the above-mentioned fertiliser stocks – MFL, FACT, NFL and RCF – have touched their respective 52-week highs on Thursday.

Among other fertiliser stocks such as Khaitan Chemicals & Fertilisers, Mangalore Chemicals & Fertilisers have also jumped around 10 per cent, while Deepak Fertiliser and Chambal Fertiliser each surged between 2-3 per cent on the BSE intraday today.

“In the current scenario where we are witnessing correction of raw material prices in the international markets, the government of India has finally decided to reduce the subsidy bill," Harmish Desai, Research Analyst, Phillip Capital, a domestic brokerage firm said in his sector report.

Desai added that the government has been able to take this decision because of price correction of key input raw material and fertilisers such as Phosphoric acid (30%), Sulphur (49%), Di-ammonium Phosphate [DAP] (39%) and Urea (34%).