FACT, Rashtriya Chemicals, Chambal Fertilisers, GNFC, Deepak Fertilisers shares jump up to 18%; here's why

Shares of Fertilisers and Chemicals Travancore Ltd (FACT), Rashtriya Chemicals and Fertilisers Ltd (RCF), Chambal Fertilisers & Chemicals Ltd, Gujarat State Fertilisers & Chemicals Ltd (GSFC), Gujarat Narmada Valley Fertilisers & Chemicals Ltd (GNFC) and Deepak Fertilisers & Petrochemicals Corporation Ltd surged as much as 18.31 per cent in Tuesday's afternoon trading session.

The surge came after the government issued the Natural Gas Regulation Order, 2026. As per the order, the natural gas supply to fertiliser plants will be capped at around 65 per cent of the last six-month average. The order also specified that the gas supplied to these units must be used only for the production of fertilisers and not for any other purpose.

Natural gas is a crucial input for fertiliser companies as a large portion of it is used as feedstock in the production of ammonia, a key raw material required for manufacturing urea.

Additionally, Kranthi Bathini, Equity Strategist at WealthMills Securities, noted that fertilisers and select chemical pockets saw some relief rally and moved higher following a correction in crude oil prices from its recent peak of $120 per barrel.

"With that being said, the volatility in crude rates creates pressure on these entities in the medium- to short-term. One needs to be careful, as we can witness heightened volatility in these counters as well. Existing investors can continue their positions, but fresh accumulation is not advised at current levels," he added.

Ravi Singh, Chief Research Officer at Mastertrust, mentioned that the West Asia conflict couldn't have come at a worse time for India's fertiliser sector, as the Kharif season is just around the corner and the supply chain is already under stress.

"India sources nearly 30 per cent of its fertiliser needs from imports, with the Middle East being a major supplier. That's now a problem. Disrupted supply routes and sharply higher LNG prices are squeezing companies like Chambal Fertilisers, GNFC, Deepak Fertilisers and RCF from both ends — ammonia, their key raw material, is getting expensive and increasingly difficult to procure," he also said.

"Agrochemicals aren't in a much better position either. Their entire cost structure is built around crude oil derivatives, which means every time crude makes a high, it will affect margins directly. Stocks like UPL and Bayer Crop Science will be in focus," Singh added.

"The one relatively comfortable pocket in this space is speciality chemicals — particularly companies like Navin Fluorine, Gujarat Fluorochemicals and Atul, which have limited Middle East exposure. As global supply tightens, they could actually benefit from improved pricing power rather than suffer from it," he further said.