The Nifty Chemicals index surged 5.6% or 1,560 points to hit the day’s high of 28,886.20. In the 20-stock index, 19 traded in the green, with Aarti Industries emerging as the biggest gainer. The stock jumped 19% intraday. The next in line were PCBL and Gujarat Fluorochemicals which gained up to 15% on the intraday basis.
Navin Fluorine, Atul Deepak Fertilizers and Petrochemicals Corporation and UPL were up by over 5%. SRF, Swan Corp, PI Industries, Sumitomo Chemical India, Deepak Nitrite, Coromandel International, Solar Industries India, Pidilite Industries, Linde India, Chambal Fertilizers & Chemicals, HSCL and Bayer Cropscience rallied up to 4%.
The only laggard was Tata Chemicals, which was down 0.3%.
How chemical companies benefit:
Brokerages see a clear advantage in 3 key areas:
1) Operating leverage
Axis Direct said that the deal will likely give chemical companies operating leverage as export volumes will likely recover by 20–25% following a tariff ease, leading to a jump in the factory utilisation rates and spreading fixed costs over more units.
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Axis Direct highlighted competitive advantage Indian chemical companies would gain as a result of the trade deal. “Most companies have been absorbing a portion of the 50% tariff to stay competitive. Halving the tariff allows them to drop their prices slightly to gain volume while still keeping a larger slice of the profit,” it said.
Bajaj Broking in a note said that tariff relief can support better pricing, higher volumes, and stronger customer relationships, particularly for companies operating in niche, high-margin applications, it said.
2) China +1 strategy
If tariffs on China remain high, Indian firms gain a massive structural advantage in the North American supply chain, Axis said.
Echoing a similar sentiment, Bajaj Broking said that exporters of specialty chemicals, agrochemicals, and fluorochemicals with exposure to the US stand to benefit from improved trade economics and continued diversification away from China.
3) Rupee Stability & lower input costs
The rupee’s worst performance for the past one year was linked to the delay in the US-India trade deal. The impact immediately showed on Tuesday as the INR rose 1.5% to 90.1250 per U.S. dollar and is on course for the best single day rise since 2018.
“Easing trade tensions are likely to support the INR and improve availability of key raw materials, reducing the cost of imported raw materials (like specialized crude derivatives for chemicals),” Axis said.
Commodity and currency expert Anuj Gupta expects it to strengthen to 89.50 to 89 levels very soon.
Stocks in focus
Chemical companies like Aarti Industries, UPL, SRF, Vinati Organics and Gujarat Fluorochemicals are preferred stock picks for Axis.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)