The Indian stock market closed the holiday shortened week ending 1 April with the BSE Sensex adding 1,021 points and jumping 2% to close at 50029 levels, while the Nifty 50 climbed 360 points or increasing by 2.40% to close at 14867 levels. There was renewed buying interest by investors on the back of the stimulus package announcement in the US. From the sectoral front, the metal sector was a star performer with the Nifty Metal Index rising by a whopping 8.6% supported by steel stocks. With the Q4 FY21 financial results around the corner, most analysts are expecting a reasonable strong earning season and more earning upgrades as well. The last two quarters have seen many earning upgrades and even though the market might consolidate or pause for a while, the equity market remains in a positive uptrend and should continue to do well. Analysts are bullish on the fertiliser sector during the next one year as the government has implemented several path-breaking reforms, including the introduction of the Fertiliser Management System and Direct Benefit System, to monitor the complete operation across the value chain of the fertiliser industry. Given that the fertiliser subsidy for fiscal year 2020-21 accounts for a major burden for the government amounting to Rs 79,530 crore, it is a given that a responsible and sustainable design be created to implement the distribution system of fertiliser in an efficient manner. At present, the farmers pay the subsidised price while the difference between the MRP and the cost goes as subsidy to the manufacturers. To solve the many challenges faced by the farmers, Direct Cash Transfer can be a game changer for the fertiliser industry and the entire ecosystem of agriculture in our country. Analysts tracking the fertiliser industry expect this sector to be on a cusp or rerating and many fertiliser stocks to do well in the FY21-22. National Fertilizers Ltd has once again reported highest ever fertiliser sales of 59.36 lakh MT during FY 21 against 57.04 lakh MT during FY20. The company produced 37.99 MT of Urea recording a capacity utilisation of 117% despite Covid-19 restrictions and other challenges. Apart from fertilisers, the company registered a steep growth in sale of seeds growing by 35% while the agrochemical segment registered a 95% growth over the previous year. The government has proposed to sell a 20% stake in National Fertilizers Ltd through an offer for sale issue bringing down its stake from 74.71 % in the company. The National Fertilizers stock currently quoting at Rs 55 can deliver handsome returns with a price target of Rs 80 in the next one year time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.