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Fertiliser Sector Stocks Surge on GST Rate Cut Expectations

02 July 20244 mins read by Angel One
This article explores the recent surge in fertiliser sector stocks driven by expectations of GST rate cuts and positive industry forecasts.
Fertiliser Sector Stocks Surge on GST Rate Cut Expectations
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Fertiliser stocks have soared to record highs amidst anticipation that the upcoming Goods and Services Tax (GST) Council meeting could recommend exempting essential plant nutrients from the current 5% tax. Scheduled for June 22, this meeting marks the Fitment Committee’s first session since Prime Minister Narendra Modi’s third-term inauguration. Government-run firms NFL, RCF, GSFC, GNFC, and FACT witnessed gains of more than 5% over past week, buoyed by prospects of increased fertiliser demand if the proposed tax reduction materialises. This upward trajectory also coincides with robust monsoon forecasts and precedes the eagerly awaited annual budget in upcoming month of July 2024

Policy Implications and Market Sentiment

The Fitment Committee’s proposal to reconsider GST rates on fertilisers reflects ongoing efforts by the BJP-led NDA coalition to alleviate rural distress and support agricultural communities, particularly following significant voter dissatisfaction in states like Punjab and Uttar Pradesh during recent national elections. The process of GST rationalisation for fertilisers involves intricate steps from committee recommendations to governmental decision-making, potentially influencing market sentiment and investment behaviours.

Positive Industry Outlook and Forecasts

IMD’s forecast of above-normal rainfall for FY25, a rare occurrence after eight years, bodes well for the upcoming Kharif and Rabi seasons, suggesting heightened agricultural activity and fertiliser demand. This, coupled with moderating raw material costs and ongoing initiatives to enhance farmer income, further strengthens the sector’s outlook.

Fertiliser Stocks to Watch

Given the positive outlook for the fertiliser sector, investors seeking exposure to this space may consider to add following companies in the watchlist given increase in the momentum

Name Current Price (Rs) Market Cap (Rs crore) Return over 1 week (%)
Rama Phosphates 223.55 395.43 26.5
F A C T 1089.7 70511.43 17.64
Khaitan Chemical 82.81 803.25 15.79
Shiva Global 51.34 51.31 15.71
Basant Agro Tech 24.2 219.25 15.58
M P Agro Inds. 14.49 8.41 12.2
Natl.Fertilizer 151 7407.77 10.59
R C F 222.4 12269.58 10.51
Aries Agro 281.5 366.04 10.47
Chambal Fert. 550.2 22043.87 7.54
G S F C 273.1 10882.48 7.07
S P I C 96.41 1963.35 6.81
Paradeep Phosph. 90.87 7403.86 6.61
Madras Fertilize 128 2062.1 6.24

In conclusion, fertiliser sector stocks have surged on expectations of GST reforms and promising industry forecasts. Investors eyeing potential policy changes and favourable weather patterns may find fertiliser stocks compelling for their portfolios

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

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