Agri stocks: Analysts stay selective as rain deficit widens; top picks here

Analysts said concerns over agri stocks are justified due to the rainfall deficit, but suggested investors to stay selective rather than avoid the sector altogether.

The Southwest monsoon has shifted the focus to India's agriculture and allied sector. As per data, India had received 219.4 mm of rainfall till July 12, compared to the normal 266.9 mm. The rain deficit has now widened to 18 per cent, after a strong revival in recent weeks narrowed the deficit to 12 per cent in the first week of July.

 

The rain deficit has delayed sowing of Kharif crops, which analysts say pose a significant challenge for the agriculture sector.

 

Notably, agriculture and allied activities contribute nearly one-fifth of India's income and account for 46 per cent of the workforce. 

 

 

Investors cautious due to slower Kharif sowing

 

As a result of the weak monsoon, analysts said that the near-term outlook for agri stocks has turned more selective, adding that below-normal monsoon progress and slower Kharif sowing have made investors cautious on the sector.

 

As per the Agriculture Ministry data, the area sown to kharif crops like paddy remained 16 per cent lower at 531.25 lakh hectares so far (till July 10) against 632.69 lakh hectares in the corresponding period of the last year due to weak monsoon. 

 

Companies may face earnings pressure

 

Companies, analysts said, with limited product diversification, weak backward integration, elevated input costs due to geopolitical tensions and high dependence on a single crop cycle are likely to face earnings pressure in Q1 FY27. However, Saurav Chaubey, equity research analyst, SAMCO Securities, said that the weakness appears cyclical rather than structural. 

 

"If monsoon activity improves in the second half and sowing normalises, demand recovery across fertilisers, crop protection and irrigation could restore earnings momentum, making the sector attractive beyond the current quarter," he said.

 

Historically, the April–September period marks the peak season for agri-input companies, and a healthy monsoon directly supports demand for crop protection products, fertilisers and other farm inputs.

 

Analysts remain selective 

 

On whether investors should buy or avoid agri stocks, Avinash Gorakshakar, director and head of research at Profitmart Securities, said the concern is understandable because June is normally the key planting period for Kharif crops. He said investors should remain selective rather than avoid the sector altogether, as it continues to offer attractive medium to long-term opportunities.

 

Echoing similar views, Saurav said that stock selection will be key amid near-term uncertainties, and exuded confidence that a normalisation in monsoon later in the season would improve sector earnings. 

 

UPL, PI, Coromandel, Shakti Pumps among top picks

 

He said that PI Industries remains his top pick owing to its specialty-led business model and resilient earnings visibility, while Coromandel International is well-placed through its integrated fertiliser and crop protection franchise. Shakti Pumps continues to benefit from structural demand for irrigation despite weather volatility.

 

Among fertiliser companies, he said that integrated phosphatic players like Coromandel International and Paradeep Phosphates are better positioned than commodity-focused peers.

 

Avinash Gorakhshar said that he prefers UPL, Sumitomo Chemical, and Sharda Cropchem. 

 

UPL: Buy at around ₹595 | Target: ₹700 | Duration: 12–18 months

 

Sumitomo Chemical: Buy around ₹514 | Target: ₹625 | Duration: 12–18 months

 

Sharda Cropchem: Buy around ₹915 | Target: ₹1,100 | Duration: 12–15 months  ============================================ 

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