These tailwinds are fanning flames for turnaround in aquaculture stocks

Nifty is almost 1 per cent away from its lifetime high of 15,431.75 and has also, more than doubled from the lows of March 2020.  

An interesting aspect of the rally, which we have seen in the markets, particularly over the last 6-9 months, has been the change in stocks as well as the sectors that have been outperforming when the pandemic broke out in March 2020. It was defensives like pharmaceuticals and information technology (IT) that took the charge. Soon after that, sector rotation took place and the torch was passed onto different sectors such as banking, metal, PSU, and so on. However, the most important takeaway is the broad-based rally.   

It seems that now, it’s the turn for stocks from shrimp companies to outperform. There were three stocks i.e. Avanti Feeds, Apex Frozen Foods, and Waterbase, which underperformed Nifty 500 index in FY20-21 due to COVID-19-led disruptions. However, recently, these stocks are seen to be back in the momentum as Apex Frozen Foods, Water Base, and Avanti Feeds are up by nearly 30 per cent, 17 per cent, and 16 per cent, respectively on a month-to-date basis.  

So, a question arises as to what is working in the favour of these stocks in recent times?  

First of all, as the global markets are gradually recovering from the impact of COVID-19 and the economies are showing signs of improvement, the demand for shrimp consumption is also expected to pick up.  

Secondly, according to trade data by Ecuador’s Camara Nacional de Acuacultura, or National Chamber of Aquaculture, Ecuador exported 76,000 metric tons (MT) of shrimp last month, worth $404 million, up from the previous monthly record of 72,000 MT in May 2020. 

Compared to March, shipments grew by 13,500 MT and $79m in value while exports to China rose from 12,000 MT to 37,000 MT. Besides, the average unit value of exports also picked up to $0.10 per kg in April, rising from $5.23/kg in March to $5.33/kg as quoted by Undercurrent News.