They most certainly do.
I've done a decent amount of reading on using ecological cues to infer stuff about what's below ground. For applications such as mining, construction and farming the science is well understood. The dowsers are probably just taking a good guess about the substrate based on what they can see above. Between plant life, evidence of erosion, soil type, climate and everything else you can observe at the surface you can combine things you know about those things and use logic in order to rule things out and make some surprisingly accurate predictions about environmental conditions that you cannot directly observe.
The dowsers can probably "detect" water better than a random guess even if they can't explain how because they're probably observing the ecology on a subconscious level and have a lot of practice. That said, I'd bet money on the scientists being right about the whole rods and gravity thing being pure BS.