Why RCF Share Price is Rising

The government is like a gardener who has just planted seeds, and now the first sprouts are starting to show.

Similarly, with the Modi government back in power, various sectors have started to kick off, and one by one, all sectors are feeling the impact leading up to the Union Budget announcements.

For instance, the Nifty Bank index hit a record high of 52,000 earlier this week on Wednesday.

Another sector feeling the positive impact is fertilizers. Fertiliser stocks such as National Fertilisers, Chambal Fertilisers & Chemicals, Madras Fertilisers, among others saw a sharp rally after a recent announcement by the Union Cabinet supporting the sector.

The outlier stock among all was Rashtriya Chemicals and Fertilisers (RCF).

RCF share price rallied 20% yesterday, and in the past five days, its share price has surged by an impressive 34.8%.

Read on to know what the big-bang announcement is and what other reasons are driving the rally in RCF's share price.

#1 MSP Hikes Announced by the Government

On Wednesday, the Union Cabinet announced the minimum support price (MSP) for 14 Kharif-season crops, including paddy, ragi, bajra, jowar, maize, and cotton.

This MSP hike is projected to cost the government Rs 2 trillion (tn). It is expected to generate an estimated Rs 350 billion (bn) gain for farmers compared to the previous season. The goal is to significantly boost farmers' incomes and improve their economic conditions.

The increase in MSP ranges from 1.4% to 12.5%. Paddy, the most widely cultivated crop, will see a notable 5.4% rise. The highest absolute increases have been recommended for oilseeds and pulses.

Investors anticipate that the rise in MSP will enhance farmers' purchasing power. This is expected to stimulate their investment in agricultural inputs like fertilisers.

#2 GST Relief on the Cards?

According to reports, the GST council in its upcoming meeting, might review a proposal to lower the GST on fertilisers.

The Fitment Committee, which reviews tax rates, is considering this proposal. They are cautious about possible issues related to duty inversion. However, they are still open to the idea of lowering the GST on fertilisers.

This could result in the committee recommending to the council that the GST rates be adjusted. Presently, the GST on fertilisers is 5%, but the industry is pushing for it to be reduced to zero. If this change is approved, fertilisers would become much cheaper, providing significant cost savings for farmers.

This potential reduction in GST has contributed to the recent increase in RCF share price, as investors anticipate higher demand for fertilisers.

#3 Early Arrival of Monsoon

Shares of fertiliser and agrochemical companies were among the top gainers last week. This surge came after monsoons arrived earlier than expected in several regions, including Maharashtra, Gujarat, and Rajasthan.

Normally, these areas receive significant rainfall later in the season, but this year the monsoons have advanced ahead of schedule. Analysts noted that this early and widespread rainfall is likely to benefit the agriculture sector.

Consequently, investors are optimistic that the good rainfall will boost crop yields and increase the demand for agricultural products, including fertiliders and agrochemicals. This positive outlook has driven up the share prices of companies in this sector.

What Next?

The Indian fertiliser industry is blooming, with a projected market size of Rs 1.4 trillion (tn) by 2032. This growth stems from a flourishing agricultural sector fueled by rising demand and strong government support.

India's position as a giant in fruit and vegetable production further sweetens the deal for the industry. RCF stands to benefit from this fertile ground.

However, sunshine and rain aren't the only things that matter. Climate change casts a long shadow, with projections suggesting a potential decline in crop yields. This could dampen fertiliser demand, impacting RCF.

Additionally, the government's push for organic farming might lead to a shift away from traditional fertilisers, potentially squeezing RCF's market share.

Despite these uncertainties, there are opportunities to sprout. The government's focus on self-reliance in fertilizer production presents a key growth driver.

Another exciting avenue is the development of nano-agri products, including nano fertilisers and micro-nutrients. These hold promise for promoting environmental sustainability while maintaining crop yields. RCF's ability to contribute to this innovative space will be crucial for its long-term success.

In conclusion, RCF finds itself in a field with both promise and challenges. Its success will depend on navigating these uncertainties, adapting to changing needs, and potentially capitalising on the burgeoning nano-agri market.

How RCF Share Price has Performed Recently

In the past five days, RCF share price7j has rallied 25.8%. In the last month, it is up 38.8%.

In 2024, so far its share price has rallied 25.4% and its surged 87.3% in the last year.

The stock touched its 52-week high of Rs 227.9 on 21 June 2024 and a 52-week low of Rs 105.4 on 14 August 2023.

About RCF

Rashtriya Chemicals & Fertilizers (RCF) is an Indian central public sector undertaking which produces chemical and fertilizers and is based in Mumbai.

It is under the ownership of Government of India and administrative control of Ministry of Chemicals and Fertilizers. RCF is fourth largest government owned-fertilizer-producer in India.

To know more, check out RCF's financial factsheet and its latest quarterly results.

You can also compare RCF with its peers:

RCF vs Deepak Fertilisers

RCF vs Madras Fertilisers

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...