The catastrophic floods which have destroyed Pakistan's rice crop seem to have opened doors for India's Basmati rice producers. One of the beneficiaries has been Basmati rice exporter KRBL. Its stock price gained 54% over the last five days. Today, however, it managed just 1.80% or Rs 0.65 to end at Rs 36.80. It touched an intraday high of Rs 38.50 and an intraday low of Rs 36.05 and touched a 52-week high of Rs 38.50.Why the run-up?
The most devastating floods in Pakistan’s history has destroyed crops and damaged infrastructure severely. A rice exporters’ group in Pakistan has forecast that exports may plunge significantly for the year.
In an interview, Anil Mittal, CMD, KRBL said, "The rice prices have increased by about USD 100 in the last 10-15 days. This is primarily because Pakistan floods have helped India to boost their prices. Since Pakistani prices have also increased by USD 100-150 in the last one month, that is the reason Indian prices have been boosted by USD 150 per tonne.
India, the second largesst producer of rice, had put into practice a trade ban on non-Basmati rice in April 2008 to increase the country's domestic supplies. The drought in 2009 further compounded issues for the government with a double-digit fall in rice production forcing it to continue with its restrictions in 2009.
Mittal however expects relaxations on export parameters for non-Basmati rice any time soon. "Looking at the monsoons and looking at the prospects of non-Basmati crop, I am quite confident that by October, the government will take the position of the crop and will definitely open the exports of non-Basmati rice."
As compared to about 2.8 million tonne of the total Indian export, KRBL's export this year is about 140,000 tonne. "We are expecting a 20% rise overall. The Indian exports of Basmati will jump by 20% this year because of the Pakistani floods," said Mittal.
What experts said during the week:
Rahul Mohindar, viratechindia.com told, "KRBL is pretty good from a long term count. But the stock has obviously run up to a good degree. It had a significant price and volume breakout over the last couple of weeks, which certainly makes this very potential longer run. But again if you are worried about the short term, Rs 36 to Rs 38 is a resistance area. We are still sitting in that zone where we might knock off 8% or 10%. So unless you are really worked out about the very short term I would still recommend holding on to the stock. We see this as a candidate for about Rs 52 and one has to be prepared that the stock can correct to something like Rs 31–32. So keeping that downside cushion, one should continue holding on to KRBL. It has made a case with the kind of volumes and price breakouts that we have seen over the last week where it shows that there is a lot more potential to come."
He added,"I am obviously looking at a timeframe of about 6 months plus. It’s a stock which can give you one of those sudden momentum moves. But again one should keep a timeframe of approximately 6 months in mind."
Mitesh Thacker, Technical Analyst, miteshthacker.com said, "We have seen a strong run-up in all the rice stocks. KRBL though it is difficult to give a price target on it, because it has broken into all time highs, but if we look at the momentum and the technical setup, there is at least a 15% upside, and Rs 40-42 should be easily tested probably even higher."
