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Updated on: Friday, September 03, 2021, 06:46 PM IST

Teji Mandi Explains: Chemical sector booming, stocks at high valuations

Representational image of stock market | Pixabay

Representational image of stock market | Pixabay

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Short Description- The chemical sector is a niche one and remains behind the curtains for traditional investors.

China is known as the world’s largest chemical manufacturer. With the strict regulations in China and especially post-COVID, the focus has turned to India. Chemical companies in India are busy building larger facilities to accommodate high demand. The capacity utilisation levels of these companies have also peaked. With more and more demand, it’s expected that the sector will grow massively in the coming years.

Focus Shifts to India from China

Specialty chemical stocks have been gaining traction this year amid an improved outlook for the sector. Post-COVID, most countries want to reduce their dependence on China. The focus directly comes on India to manufacture chemicals at a faster rate. High demand has convinced analysts to keep a positive outlook on the sector. Experts believe that India’s share in the specialty chemicals will double over the next five years.

Chemical Stocks Faring at High Valuation

Most chemical players have reported better-than-expected earnings in Q1FY22. Experts feel that the sector is poised for growth. Hence, the valuations of chemical stocks are faring at higher valuations. Strong domestic demand and export opportunities are boosting the sector. According to Motilal Oswal’s report, India’s share in specialty chemicals is expected to double over the next five years–at a compounded annual growth rate of 12% to $64 billion by the calendar year 2025.

Closing Comments

Chemical stocks have doubled while some of them have tripled investors’ wealth. In the last two weeks, the stocks are witnessing exuberant growth. Continuous expansion of this sector is expected to deliver stellar returns.

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Published on: Friday, September 03, 2021, 06:44 PM IST
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