Finance Minister Nirmala Sitharaman's third tranche of announcements of the mega Rs 20 lakh crore stimulus reiterated the Modi government's commitment towards the agriculture sector and highlighted its intent to rehabilitate the country's farmers, following the COVID-19 crisis.
FM Nirmala Sitharaman on May 15 announced 11 measures to boost the sector, ranging from the amendment of Essential Commodities Act to a Rs 1 lakh crore fund to boost agriculture infrastructure.
"The government will amend the Essential Commodities Act to enable better price realisation for farmers. Agriculture products, including cereals, edible oils, oilseeds, pulses, onions, and potatoes to be de-regulated," said Sitharaman.
Experts give thumbs up
The announcements were welcomed by analysts and experts and they said that these steps are long-term positives.
"The announcements made by the government so far have addressed the key concerns of the MSME sector, migrant labourers, farmers, the marginalized, which is indeed the need of the hour, apart from enhancing the liquidity flow in the system," said Aamar Deo Singh, Head Advisory, Angel Broking.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said support to agriculture is support to 50 percent of India's workforce and thereby relief to 50 percent of India's households.
"The third tranche of FM's announcements is welcome, even though the financial outlay for this package also is limited. The proposed central law giving farmers the freedom to sell in markets of their choice is a long pending reform and is eminently desirable. Allowing e-trade in agri produce and measures to increase the availability of farming technology are welcome measures," said Vijayakumar.
On similar lines, B Gopkumar, MD & CEO, Axis Securities said the announcements pertaining to the agriculture sector and fisheries are intended to strengthen the value chain and infrastructure.
"The government's thinking is long-term in improving the economic fundamentals in providing key support which can improve the supply chain, reduce wastage, and better price realisations. This will help in the creation of employment and lead to long term demand creation," Gopkumar said.
"We do not foresee any major immediate benefits of the measures announced but the long-term thinking of the government is clear. The impact on equity markets of today's announcements is likely to be limited as benefits are back-ended.”
Stocks to be in focus
Vikas Jain, Senior Research Analyst at Reliance Securities said the third tranche of reforms are focused on agriculture and essential commodities act to be amended. It could benefit some agri-related stocks but the bigger trigger and benefits for consumers and companies are missing.
Prashanth Tapse, AVP Research at Mehta Equities said Avanti Feeds, Apex Frozen and Waterbase would be in action after FM Nirmala Sitharaman’s announced the third phase of a package worth Rs 20,000 cr for fishermen through PM Matsya Sampada Yojana.
"On the trading page, charts suggest Avanti Feeds can test Rs 450-460 levels in the coming week on the back of FM support to space. We advise momentum traders to buy the stock on the FM measures with stop loss near Rs 414," Tapse said.
Ajit Mishra, VP- Research at Religare Broking said the measures for the agriculture sector could be beneficial to companies like fertilizer and crop protection companies like Rallis India, Coromandel International, Godrej Agrovet and Rashtriya Chemical Fertilizers.
"In animal husbandry, the creation of an infrastructure fund of Rs 15000cr will facilitate private investment in dairy processing, improving cattle feed infrastructure as well as improve the health of animals. Further, incentives will be given for establishing plants for the export of niche products. This may benefit companies present in dairy and cattle feed businesses such as Godrej Agrovet, Hatsun Agro, Heritage Foods," Mishra said.
For fisheries, the government has allocated Rs 20,000 cr for aquaculture and infrastructure under Pradhan Mantri Matsya Sampada Yojana which will help in filling critical gaps in the fisheries value chain. Also, it would benefit fishermen in getting financial support as well as increase production.
Mishra said from these initiatives, stocks like Avanti feeds and Apex frozen would benefit.
"Given the volatility in markets, from the above-mentioned stocks, we would recommend investors to buy Coromandel International, Godrej Agrovet and Rallis India at current levels and on further dips," said Mishra.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.