Chemical sector is doing quite well during the pandemic and it certainly has a formidable future, comments Sandip Sabharwal, Investment Advisor and Research Analyst who is highly optimistic about its mega expansion amidst the new realities. Like many of his counterparts in financial advisory, he too bets big on the chemical stocks, especially when it is for long-term returns. 

“In the aftermath of COVID-19 pandemic, the Pharmaceutical and Chemical sectors are expected to do exceptionally well. Given there are less chemical companies in India, it takes a lot of time to create chemical entrepreneurs due to a plethora of factors such as long R&D period, huge investments and regulations. Therefore, big companies will become bigger,” says Sandip Sabharwal while speaking at the ‘Outlook Business Investment Summit’ held virtually on 21-22 May, 2021. 

The growing pragmatism about the safety of stocks in the chemical sector by top investment advisors stems from the fact that there is an increased demand in export markets and growth in specific Pharmaceutical segments. Majority of them also agree that China plus one factor is playing a big role in driving its visibility. 

However, from the industry perspective, many are not fully convinced about the overall growth and say it will be limited to only the top notch players. As per Ambreesh Baliga, Market Analyst and Independent Investor, the post COVID market belongs to only those who have larger computing books. Those who hold the bigger account book, will do better. Although the chemical and pharma sector has performed well in the last one year, I feel the humongous growth is limited especially to the COVID-19 related products. Whether it will turn into something bigger will have to be seen. At the same time, there are a huge number of people who will survive COVID-19 and those are expected to have few health issues. That might be a driver for pharma companies.” 

One of the sectors that will have high share prices and would be looked at favorably by investors is Specialty Chemicals, believes Ambreesh who is confident that it will do well in the foreseeable future. 

Ajay Bagga, Executive Chairman, OPC Asset Solutions lays thrust on a strong vaccination program to drive the market growth. 

Bagga says, “Vaccine is critical to build confidence in the fight against the pandemic but looks like we are much behind the target currently. The vaccine supply is expected to improve by July 2021 but it will take a while to accelerate the inoculation. While savings helped in the first half of the last year, the situation has changed drastically with widening of the poverty index. More people have grown poorer with their savings vanished. It will take time to recover and thus it appears that economic growth will be single digit.” 

Bagga, who predicts that in the wake of continuing suspense about the economic situation, a lot of disinvestments such as Bharat Petroleum Corporation Limited announced earlier might not witness any substantial bids any sooner. Sharing an example of Spanish Flu, he points out to its aftermath when the demand had been affected due to severe customer behavior change. “Big ticket projects will no longer be a priority and it will be affordability that will take the centre stage,” opines Bagga. 

Experts are pinning hopes on the retail sector while also lamenting the burnt faced by the SMEs sector. Comparing the first wave with the second one, experts point out the emotional fear about lurking danger of the third wave which they feel will affect the customer behavior towards the market place. Majority are predicting the downward sliding of GDP from predicted 12.8% to 9.47%. There are also talks about it going down further to just 7%. None of them are expecting any major pull back in demand during the festive occasions this time. 

Sushant Bhansali, Chief Executive Officer, Ambit Investment Advisors, however, has a differing view about the economic growth. He says, “There is still a chance that Indian economy might grow at the double digit figure. Due to the lessons learnt during the first wave, potential customers have increased their savings and will be spending once the tide of the second wave mellows down in upcoming months. By June 2021, the vaccination is expected to pick up and it should reach 30-40% of the population by Diwali. The pent up demand will come out during months of September and October and drive the spending. By December, we will have heard immunity setting in and that will turn around the markets.”