Chemical stocks: Market Movers: What spurred the rally in chemical stocks, RIL and Divi’s?
MUMBAI: Despite recent doubts over their valuations and calls from some money managers to temper expectations for the sector, chemical stocks cannot stop defying gravity.
The bull market in the sector that started a few years ago entered a new leg today as investors rushed to buy various companies that specialize in different chemical products. The buying was driven by the perception that the sector is set to see another leg of earnings boom thanks to the troubles in China.
China’s power crisis is forcing its industries to cut back on production, which in turn is pushing prices of several chemical intermediates higher in the international and domestic market. Analysts believe that the firming up of pricing is unlikely to soften anytime soon and expect strong sequential growth for the sector come the end of December quarter.
Shares of Deepak Nitrite, India Glycols, Vinyl Chemicals, Bodal Chemicals, and Camlin Fine Sciences ended 7-10 per cent higher.
Divi’s Lab rides the Merck train
Shares of Divi’s Laboratory were backing headlines after languishing out of the spotlight in the past few months. The stock soared nearly 8 per cent today and ended as the top gainer on the Nifty50 index after Merck said that its COVID-19 drug molnupiravir had showed “compelling” results in phase 3 trials.
The drug could be another shot in the arm against the pandemic as it reduced hospitalization and death by 50 per cent. For Divi’s, Merck’s finding could result in a windfall that analysts suggested could boost revenues by as much as 9 per cent.
The Indian drugmaker is the manufacturer of the active pharmaceutical ingredient used in the manufacturing of molnupiravir.
RIL’s petchem business surging
The cash-generating machine that is the petrochemical business of Reliance Industries is likely to become the highlight of the September quarter earnings of the company when the company announces its results later this month.
Brokerages highlighted that the reopening of the economy is widening the spread between domestic petchem products, which is a boon for RIL. Further, the reduced capacity in China for petchem products is another booster shot for RIL as it can easily replace Chinese capacity. After a long time, it seems the legacy business of RIL is shoving its way into the spotlight.
Broader market finding its groove
After an intense sell-off that saw the smallcap and midcap stocks languish behind their largecap peers for all of August and some of September, the broad market is finding its groove again. Smallcap and midcap stocks ended last month with more gains than the Nifty50.
Today, the Nifty Midcap 100 and Nifty Smallcap 100 clocked gains of 1.6 per cent far superior to the Nifty50’s 0.9 per cent rise. Whisper it but it seems that the broad market is likely to take the lead of the bull market yet again.