Jain Irrigation Rises as Drop to 2-Year Low Lures Investors

Jain Irrigation Systems Ltd., the world’s second-biggest irrigation-equipment maker, headed for its steepest gain in more than four months after a decline to a two-year low this week lured some investors.

The shares climbed 7.4 percent to 158.1 rupees at 2:40 p.m. in Mumbai, bound for the biggest jump since Feb. 10. The stock, the top performer on the Bombay Stock Exchange 200 Index today, has climbed 16 percent since plunging on June 20 to the lowest since July 2009.

“The stock had broken down so much that it’s obvious it will move up,” said Shefali Doshi, an analyst at KJMC Capital Market Services in Mumbai.

A forecast by India’s weather office on June 21 that monsoon rainfall may be less than previously predicted may have aided the rally, Doshi said. Falls in the June-to-September season, the main source of irrigation for the nation’s 235 million farmers, may be 95 percent of the long-term average, compared with 98 percent estimated in April, the state forecaster said.

“Investors may also be factoring in higher demand for irrigation equipment” on the monsoon outlook, Doshi said.

The stock trades at 16.4 times estimated earnings for the year to March 31, 2012, the lowest in more than two years, according to data compiled by Bloomberg.

The stock was upgraded to “buy” from “outperform” today by Somshankar Sinha, an analyst at CLSA Asia Pacific Markets in Mumbai wrote in a note, cutting the 12-month price estimate to 225 rupees from 250 earlier.

The brokerage, a unit of French lender Credit Agricole SA, expects a “rebound” in Jain Irrigation’s cash flow as the company may get delayed receivables of 9 billion rupees ($200 million) from three provincial governments in India in the year ending March 31, 2012.

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