For exporters, concerns on global tariff wars impacting sales and unfavourable emerging markets’ currency movement hurting margins, are other reasons keeping investors nervous.
Prices for potash Murate, DAP and phosphoric acid, for instance, have risen up to 20 per cent in the June quarter and could impact profitability of fertilisers and nutrient players. Analysts at Edelweiss say that despite the price hike, higher raw material costs would hurt margins for fertiliser companies, which remains a key monitorable.
Similarly, the increase in chemical prices, which had impacted profitability of agro-chemicals or crop protection players during the March quarter, can prove to be spoilsport in June quarter too.
For example, Rallis’ operating profits fell by about 19 per cent during the March quarter on the back of rising input costs from China, and a higher share of generic sales, which tend to earn lower margins. Thus, analysts are awaiting June quarter numbers for further indication.
Comparatively, seeds producers appear better placed. Rohit Nagraj at Sunidhi Securities says the opportunity for incumbents is strong, as multinational companies
are leaving seeds business in India, while rising MSPs and increasing farm credit will aid growth for players.
Though Kaveri Seeds is a preferred pick, Rallis, too, has a strong seed portfolio that can aid the company’s performance. Amongst others, analysts maintain positive outlook for UPL, PI Industries, Dhanuka Agritech and Jain Irrigation as they feel the correction is now factoring in most concerns and post results many of these could rebound.