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Agrochemicals busy playing out their cards during current market crisis; stocks rally over 100% from their March lowsqrcode

Apr. 23, 2020

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Apr. 23, 2020
>  The ongoing coronavirus pandemic has deeply affected all the core sectors but agrochemicals including pesticides and insecticides are currently in high demand.

>  Normal monsoon forecast and agrichemicals placed under essential services are the two primary reasons working out for this space.

>  Agrochemicals stocks have soared over 100 percent from their March lows.
 
 
The ongoing coronavirus pandemic has deeply affected all the core sectors but the niche ones that produce raw materials like agrochemicals including pesticides and insecticides are currently in high demand.
 
The major news that played well for the agrochemicals sector is government's announcement of placing 'pesticides' under the 'essential category', and Indian Metereological Department along with other global weather agencies forecast of a normal rainfall this year.
 
In fact, the performance of agrochemicals have been quite extraordinary as compared to others, since the lockdown. There has been a continuous buying in this sector since March 21. Stocks like Bayer Cropscience and PI Industries rallied 36 percent and 50 percent respectively, while Insecticides (India) zoomed 112 percent.
 
Rallis India, Dhanuka Agritech and Sharda Cropchem also climbed up to nearly 50 percent, from their March lows.
 
The government support, high demand for paddy crops and pulses and a normal average monsoon has played out for agrochemicals well resulting into a giant rally.
 
The challenges for other sectors doesn't fret the agrochemical players. There could be some logistical and labour issues due to the lockdown but since agriculture falls under essential services/commodities, these issues will not stay for long and will eventually ease out, said Edelweiss.
 
In fact, Prabhudas Lilladher feels that the sector will only have a marginal impact on Q4 topline as liquidation won't be materially impacted given the restriction in movements will ease farming activities.
 
One big drawback to this sector is China. However, Asian Markets Securities believes that the country is currently facing a supply chain disruption.
 
"Favourable regulatory environment and supply disruption in China will be beneficial for India. Indian players with technical manufacturing and backward integrated facilities are set to gain from these changing dynamics", said the brokerage.
 
India's agrochemical industry to record an 8-10 percent CAGR over the next two years, it added further.
Source: cnbctv18

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