While they come under the broad umbrella word of “Chemical sector” the fact is that it has three broad segments. Speciality chemical, Performance chemical or Commodity chemical. Each with its own operating matrix of supply chain and demand and also the valuations are different for each of them. In the last ten years, each of these segments have been going through a different cycle. But there is one common thread in all these segments, that is China. One news from China regarding whether it has started producing more of a chemical or there has been a shut down in any plant. The actual chemical prices and the stock price of the companies, both see wild swings. While it would be wrong to say that this will go away, over the long term there is a possibility that some segment in the chemical space will be able to delink and become less sensitive as more backward integration happens in that space. We look at the 5 stocks, where analysts have “hold” recommendations as
Sanjiv Bhasin says: “Tata Steel and NALCO are both in our portfolio from, of course, much lower levels. If we want to play both the aluminium and the steel cycle, it has to be Tata Steel. Tata Steel has consolidated for over three years after that one-off move to 150 or maybe and now it is looking set to cross that 150-175 mark. Add Tata Steel and NALCO on declines.”
Sanjiv Bhasin: “Aarti and SRF. Those have been two of our top picks and they have been very sweet performers, particularly Aarti from Rs 450, crossed Rs 630. We still think that is one stock which must be in your portfolio despite the 50-70% runup. SRF is a pedigree stock as is Atul. These are three names which we would be very bullish on even at this price.”
“The chemical industry seems to have bottomed out and if there is going to be progress on the China front in other avenues of destocking being over, this industry on the back of being a laggard in the last six months can come out to be an outperformer. Both SRF and Aarti are in our portfolio and we are extremely bullish on them in the slightly longer term”.
“In auto, I still would put my money on Maruti for Rs 12,000. Eicher and Hero and Bajaj are the three winners but they are all hitting new highs. So, either you chase new highs, which is a technical breakout or you stay with Maruti. I would put my money in Maruti as well as Eicher.”