According to marketmen, expectations of a better price realisation and an early end to the indefinite workers' strike have lifted sentiments in the tea counters. Although brokers say the rally in the sector will gain further momentum in the coming days, they are of the opinion that it will be prudent to stick to select counters like Tata Tea, Goodricke Group and Jay Shree Tea, Warren Tea, etc.

Marketmen say the fall in tea production, both in the domestic market as well as international market, will lead to better realisations for tea companies thanks to higher prices. During January-June this year, tea production fell by 19 per cent to 261.2 million kg as against 322.1 million kglast year.

The dip in production was on account of a prolonged dry spell and the failure of pre-monsoon showers in the north-east. Even in the global market, tea output has been adversely affected. Kenya, the world's largest exporter, reported a 39.8 million kg fall in production up to May, while countries like Malawi, Uganda and Bangladesh (other major exporters) also reported a fall in production.

The other reason for the rise in the tea stocks, say marketmen, are reports that there could be an early end to the indefinite strike by workers in the north Bengal tea gardens (on since July 12). As July and August are important cropping months, the industry stands to lose as much as 8 lakh kg of tea per day thanks to the total strike in the Dooars and Terai area and partial strike in Darjeeling. Thanks to the strike, offerings at the auction centre have also been lower as it was feared that there could be disruptions in despatches. With the strike now expected to end soon, tea companies can hope to salvagesome of their production losses.

On the bourses, tea stocks have hotted up. The gains in the past 7 sessions range between 42 and 21 per cent (see table). Tata Tea rose from its August 12 level of Rs 401 to Rs 504 on Friday. On Monday, the stock rose to a new high of Rs 528, before closing marginally lower at Rs 516. The Jay Shree Tea counter attracted only buyers and the stock remained frozen at the upper-end of the circuit filter at Rs 87.30. Similar was the case with the Goodricke Group. The stock opened with a upward gap from its Friday's close of Rs 97 and finally close at the day's highest level of Rs 104.8. Warren Tea also attracted sizeable buying. On Monday, the stock closed at Rs 111.75, up from Friday's close of Rs 103.

Analysts, however, warn that it may be too early to party. According to them, the high realisations may not be enough to compensate for the loss in crop, both in the first-half as well as in July and half of August (thanks to the labour unrest). Most tea companies have, in anycase, seen a dip in earnings for the year-ended March 1999. With this year's loss of crop, the companies could be hit badly. The crucial factor will be the export demand from Russia -- the main importer of Indian tea. In case of a fall in demand, as seems likely, the higher realisations in the domestic market can be ruled out. Industry watchers say tea companies will continue to have a rough ride in fiscal 2000.