Tata Tea Leads Sector Rally

Tea stocks hogged the limelight yesterday on the bourses led by market leader Tata Tea. The spurt in prices of tea scrips has been attributed to the speculative rise in auction prices of tea stocks.

The major tea scrips, namely, Tata Tea, Warren Tea, Goodricke, Assam Company and Jayshree Tea, witnessed a price freeze at the upper end of the circuit filter at the NSE yesterday.

Tata Tea was the major gainer with the scrip gaining Rs 24.50 over the previous close to end the day at Rs 317.25 on the BSE. At the NSE, the scrip gained Rs 20.50 to close the day at Rs 313.35.

 

Analysts tracking the tea sector attribute the sudden surge in the scrip prices to the firming up of international tea prices due to the recent crop failure in Kenya. There has been an overall increase of 10 per cent in tea prices in the domestic market.

A reduction in taxes announced by the Assam government is likely to benefit tea companies in the state according to market circles.

An analyst at a leading FII broking house said, Due to the crop failure in Kenya, there has been a shortfall in the international output. With Indian tea prices quoting below Kenyan tea prices, there has been an increase in demand for Indian tea in the export market, especially in the Russian market. With the operating costs remaining constant, increase in sales volumes means better bottomlines for the tea companies this year.

Says Sujay Mishra, analyst at SSKI Securities, There has been a 40 per cent shortfall in the Kenyan tea crop. Indications are that the output will be bad for the entire year. Till the time Kenyan output is back to normal, the going will be good for the Indian tea industry on the export front. In such a scenario, tea scrips should fare well in the coming days.

Leading market sources feel that most of the trading activity trends in tea scrips followed the market leader, Tata Tea .

However, analysts also pointed out that the present rates are not indicative of a firm trend in tea prices as most of the movement has been in Tata Tea.

Says Sandeep Jain of Anagram Stockbroking, Every sector tends to follow the market leader. In the case of tea stocks, major scrips seem to rise and fall along with the Tata Tea scrip. Counters like Assam Co, Warren Tea, Goodricke etc, which were very illiquid till recently, have seen a sudden spurt in activity ever since the Tata Tea scrip price has been on the move.