Expectations of normal monsoons as well as liberal doles for farmers in the run-up to the elections are driving up fertiliser stocks on the bourses. On Monday, as many as eight fertiliser stocks touched the upper-limit of the circuit filter on the back of frenzied demand. While the focus clearly was on big companies like Gujarat Narmada, Tata Chemicals, Zuari Industries, etc., small companies like Deepak Fertilisers, too, attracted some buying interest.

For fertiliser companies, things couldn't have been better. After a period of slack in February-April (when production fell short of the target of 125.19 lakh tonnes), these companies can now look forward to better times.

Analysts are hopeful of an improvement in both production levels as well as offtake thanks to the weatherman's forecast of normal monsoons and hopes of a bumper harvest. And, aspoliticians battle it out for the 13 Lok Sabha elections, sops like extended credit to farmers will add to the coffers of fertiliser companies.

Already, the government has directed fertiliser companies to supply 100 lakh tonnes of urea to farmers. It is not surprising, therefore, that punters are targeting nitrogenous fertiliser producers rather than single super phosphate manufacturers. In view of the skewed NPK ratio, thanks to the Indian farmers' preference for nitrogenous nutrients (because of lower prices compared with decontrolled fertilisers), analysts say this sector should continue to grow at a much faster rate. In February-April 1999, for instance, 96.41 lakh tonnes of nitrogenous fertilisers were produced as against only 27.14 lakh tonnes of phosphatic fertilisers.

However, one problem that will continue to haunt companies in the sector is the price realisation.

With urea being a politically sensitive subject, any improvement in prices is unlikely. It may be recalled that the BJP governmenthad tried to raise prices by Re 1 per kg, but was forced to roll it back in the face of severe political opposition. Now, with a hung Parliament being predicted once again, it is unlikely that urea prices will be hiked in the future and this will continue to affect the discounting of nitrogenous fertiliser producers.

Gujarat Narmada Fertiliser led the rally in the fertiliser stocks. The scrip opened at Rs 19.05 and soon hit the upper-end of the circuit-filter at Rs 21.15. The company, which is a prominent player of the urea industry, is now trading close to its 52-week high of Rs 23.

Tata Chemicals, which produces urea and ammonia, shot up by more than 7 per cent on Monday to be locked at the upper circuit at Rs 78.6. Gujarat State Fertiliser, Zuari Industries, Indo Gulf Fertilisers, SPIC and Nagarjuna Fertilisers have shot through the roof on the back of good demand.