How to select the best agricultural stocks to buy in India?
Agriculture is a vital industry, and investors have several methods to get a piece of the pie. Like most of the world economy, the agriculture business has been impacted by the COVID-19 epidemic. Still, it has made a fantastic comeback as commodities prices have skyrocketed in various categories. The conflict in Ukraine has further strained the supply of grains and fertilizers. Agribusiness is an enormous business and affects several sectors. Because of the size necessary for operations, market power has been concentrated in a few giants. These firms, many of which have substantial profitability, cash flows, and dividends, provide good investment prospects.
The benefits of buying agriculture share in India
- Agricultural stocks are among the most significant areas of the Indian economy, providing a living for over 58% of the workforce. The segment accounted for around 17.8% of India's GDP (GVA). The Indian agriculture industry is one of the cornerstones of the Indian economy. It therefore is intertwined with India's socio economic structure.
- Agriculture and other related sectors are, of course, critical to domestic consumption. To maintain food security and a good amount of exports, India has dramatically boosted agricultural production in diversity and volume. This leads to changes in the farming stocks business, having a substantial influence on the expansion of the agrochemical sector, making The country one of the world's most significant users of agrochemical goods.
- The use of 'Kisan Drones' to boost crop evaluation, digitisation of land data, and pesticide and fertiliser spraying would considerably assist farmers. This has favourable consequences for the industry since it gives the farm sector an essential boost. A rise in farmer income will enhance farmer purchasing power and investment in better harvest production like better seeds, crop protection goods, tractors, irrigation systems, and so on.
Things to keep in mind when choosing Indian agricultural stocks
Many top agriculture companies in India are listed in the stock market to choose from. The following are some things to think about before buying any agriculture-related listed company:
Calculating The Financial Soundness of Agricultural Stocks
Before investing in agricultural stocks in India, investors should consider the company's financial strength. It influences the company's development and sustainability. Investors can evaluate the company's financial stability by looking at its returns, particularly during the off-season.
Evaluating the Agricultural Company's product range
Investors need to know the numerous product categories the agric firm offers. The rationale is that a business with a wide range of items has a better possibility of generating more revenue.
For instance, the sales of the other items make up for a drop in selling one product. This results in a higher total profit for the business. As a result, this makes the business a good choice for investors.
Alterations in the agriculture industry's structure
Investors should also keep an eye out for modifications in the industry's regulating regulations, since these might have a significant influence on businesses. Regulations may involve changes to authorized components or substances in the agriculture business.
Agribusinesses that can dynamically adjust to such developments will be better positioned to adopt them and stay viable in the long run.
Risk consideration before investing in the best agriculture share
- Government restrictions governing the usage of certain materials and chemicals, which can be essential components of these enterprises' product offerings, may change. A shift in regulation might have a significant impact on the company's earnings since sales revenue would have to halt right away and a new product could need to be developed to replace the old one.
- Due to the company's inability to market its current products might result in significant research and manufacturing expenditures. In severe circumstances, a rival's product may overtake the company's market share, affecting its supremacy in that product line.
- In the past, the weather in India has been quite erratic, with uneven rainfall occurring in all of the country's states. Suppose there is less rainfall in a given year. In that case, farming activity may decrease for a particular crop or state, leading to a decrease in the need for fertilisers and pesticides in that year. This might substantially affect the company's sales and overall growth rate.
- Financial hazards might include failing to generate enough cash to cover anticipated obligations, making less money than anticipated, and losing market share. Increased input prices, increased interest rates, excess borrowing, a lack of sufficient credit or cash reserves, and unfavourable exchange rate fluctuations in the case of company imports can all result in financial hazards.
Top Agriculture Stocks In India
(Share Price as of 16th October 2022)
Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns
Balrampur Chini Mills Ltd.
Balrampur Chini works in the Indian sugar business, the world's largest consumer and the second-biggest sugar producer.
Avanti Feeds Ltd.
Avanti Feeds produces and sells shrimp feed, and exports processed shrimp. It has a net shrimp feed capability of 600,000 million tonnes per year, with Gujarat accounting for 60,000 and Andhra Pradesh accounting for the remaining 540,000.
Bayer CropScience Ltd.
Bayer CropScience Limited, a division of Bayer AG in Germany, is a market leader in the Indian agrochemical business, benefiting from excellent farmer connections, an extensive product range, and a solid distribution network.
UPL Ltd. produces, markets, and sells crop management products, intermediates, specialty chemicals, and other industrial chemicals, as well as research in these areas.
PI Industries Ltd.
PI Industries, founded in 1946, is a comprehensive agrichemicals solution firm that today serves the global market for complex chemistry solutions in agri or other fine chemicals.
This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.
According to Inc42, the Indian agriculture market is predicted to rise by 2025. Selecting the best stock to benefit from this growth is essential. That is the reason this article has listed some of the best agriculture stocks that have great upside potential. Some factors have also been provided to choose the best agriculture stock for long-term investment. Investment in agriculture stocks might prove beneficial if investors are patient and keep investing in listed agritech companies in India.
What are the best agricultural stocks to buy in 2023 India?
Here is the agriculture stocks list which are the best agricultural stocks to buy:
- PI Industries Ltd.
- Bharat Rasayan Ltd.
- UPL Ltd.
- DCM Shriram Ltd.
- Coromandel International Ltd.
Which are organic farming listed companies in India?
Here are 5 organic food stocks india:
- Technology Company Limited
- FMC Corporation
- SunOpta, Inc.
- United Natural Foods, Inc.
- Dole plc
How can I invest in agriculture in India?
One can invest in agricultural commodities through Exchange-Traded Funds (ETFs) or commodity futures contracts.