NFL, FACT, RCF, other fertiliser stocks zoom up to 20%; here's what's fuelling the rally

Select fertiliser stocks are showing bullish structural confirmation in long-term charts, attracting strong attention.

Fertiliser stocks including state-run National Fertilisers (NFL), Chambal Fertilisers, RCF and others zoomed up to 20 percent, extending the previous session's gains, boosted by reports of a proposal to remove Goods and Services Tax (GST) on the fertilisers.

The first GST Council meeting of Modi Government 3.0 is scheduled to be held on Saturday (June 22) where a decision may be taken to remove fertilisers from within the ambit of GST.

This is because the Fitment Committee has proposed to exempt fertilisers from GST. The committee has referred the matter concerning fertilisers to the Group of Ministers (GoM) for rate rationalisation. The committee believes that blanket exemption will lead to duty inversion.

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The sharp uptick is also driven by market optimism over the MSP hike. The Union Cabinet recently announced the minimum support price (MSP) for 14 Kharif-season crops, including paddy, ragi, bajra, jowar, maize, and cotton.

Investors expect that the increase in MSP will improve farmers' purchasing power, thereby encouraging them to invest more in agricultural inputs such as fertilisers.

Select fertiliser stocks are showing bullish structural confirmation in long-term charts, attracting strong attention. The sector, which has exhibited mixed performance in recent years, is currently displaying the first signs of leadership in the high-beta sector, said Nuvama Institutional Equities in a report.

"There are initial signals indicating base formation observed over the past few months, along with improvement in relative performance and a visible accumulation phase," the brokerage said, highlighting that the basket of stocks has formed higher tops and bottoms on medium-term charts, suggesting a probable trend change and the resumption of the uptrend.

Bull rally in fertiliser sector?

Chambal Fertiliser stock was trading 16 percent higher. In the past, the stock has doubled within 16-18 months of breaking above the 52-week highs. The current setup points to a strong uptrend with the formation of a reversal candle and momentum indicators confirming a new high for the stock, said Nuvama.

National Fertilizer Ltd (NFL) stock was up 18 percent. The price has exceeded the falling trendline drawn from the recent peak. The stock has been in the consolidation phase for the past few weeks and has absorbed the selling pressure in weak markets. The multi-frame analysis indicates a resumption of the uptrend and hints at a new swing high in the making, Nuvama noted.

Rashtriya Chemicals & Fertilizers (RCF) shares were trading 19 percent higher. The price breakout from the 16-year resistance zone pattern has formed a higher base formation around the 140-130 levels zone that reaffirms the change in polarity ie. previous resistance now acting as a support zone.

The volume spikes indicate a strong undertone and there is the emergence of multiple bullish candlesticks on the charts that further validate the presence of bulls, the brokerage said.

Also Read | Fertiliser sector poised for bull rally, showing signs of leadership in high beta sectors

Shares of The Fertilisers and Chemicals Travancore were locked in the 20 percent upper circuit limit, resulting in a gain of over 70 percent in just 11 sessions.

Other stocks such as Deepak Fertilizers (up 14 percent), Madras Fertilizers (up 17 percent), Gujarat State Fertilizers & Chemicals (up 10 percent), Paradeep Phosphates (up 14 percent), Zuari Industries (up 12 percent), and Coromandel International (up 6 percent), Rallis India were also trading with strong gains.

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