Fertiliser stocks fall after government's urea production push

Fertiliser stocks took a beating on Wednesday after the government said it directed urea manufacturing units to maximise production. Deepak Fertilisers, Coromandel International, Gujarat State Fertilizers and Chemicals (GSFC), Fertilisers and Chemicals Travancore (FACT), Chambal Fertilisers, and Gujarat Narmada Valley Fertilizers and Chemicals (GNFC) fell around 0.5-4.5 percent for the day.

Certain units have been permitted to take their output beyond installed capacity, the department of fertilisers informed Parliament in response to a question of shortage of urea due to the Russia-Ukraine war.

The department also said it is monitoring the impact of the war and taking steps to ensure import from alternative sources.

The move comes at a time when the prices of a range of commodities have shot up in anticipation of tighter supplies.

"While the Russia-Ukraine conflict has derailed global fertiliser supplies, India has also sought to import from countries like Canada and Jordan... The rise in fertiliser costs means higher government subsidies," Tanushree Banerjee, Co-Head of Research at Equitymaster, told CNBCTV18.com.

"A cap on such subsidy is clouding the near-term earnings prospects of fertiliser companies. However, this should not change the long-term view on the most promising fertiliser stocks," she said.

Fertiliser stocks have rewarded investors with handsome returns in the recent past. GNFC and Deepak Fertilisers have more than doubled investors' money during this period.