Rating agency, ICRA, has recently brought out an interest report on fertilizer companies with a positive perspective. According to the report, fertilizer companies are likely to announce healthy profit figures for FY21. This is on the back of improved off-take by farmers as rural incomes have done a lot better than urban incomes in India.

In terms of specific sub-components, Urea fertilizer volumes saw 69% volume growth in the first quarter despite disruption in April and May. Apart from Urea, phospatic and ammonia based fertilizers were also robust during the quarter. With government transferring funds under various schemes, the purchasing power of farmers remained intact.

The big takeaway for the sector is the robust monsoons reported. Hence, sales of fertilizers are expected to be strong through the year. However, timely payment of subsidies will be critical for working capital. Traders can look positively at stocks like Deepak Fertilizers, FACT and Chambal Fertilizers as short term to medium term buys.