Best Chemical Stocks in India 2024

The chemical industry has a crucial role in the Indian economy. They supply essential raw materials and finished products to various end-user such as those engaged in agriculture, pharmaceuticals, textiles, construction, and automotive. The sector's potential for growth, backed by strong consumption within the country and abroad and government support, positions it as an attractive avenue for investment.

What are Chemical Stocks?

Shares of companies engaged in the chemical industry including specialty chemicals, agrochemicals, petrochemicals, pharmaceuticals, dyes and pigments, and basic chemicals are known as chemical stocks. There are various well established legacy chemical stocks listed on Indian bourses as well new ones that are taking on the incumbents. 

Why Invest in Chemical Stocks?

Chemical stocks reflect both the sector's intrinsic strengths and the broader economic and industrial context of India. Here are key reasons why one should consider investing in chemical stocks in India:

Diversified Sector: The Indian chemical industry is highly diversified with basic chemicals, specialty chemicals, agrochemicals, petrochemicals, and pharmaceuticals. This allows investors varying risk profiles and growth prospects. 

Domestic Demand: India's growing economy itself presents a very high domestic demand for products across industries like that rely on chemicals as raw material. 

Robust Exports: India is a significant exporter of many chemicals, thanks to its competitive manufacturing costs and strong global market presence.

Government Support: The government's "Make in India" initiative aims to boost manufacturing across sectors, including chemicals. The government has also introduced production-linked incentive scheme for setting up some new chemical units. 

Performance Overview of Chemical Stocks List

Top10 Chemical Stocks to Invest in India

Reliance Industries

The stock price is above short-, medium- and long-term moving averages and hit a new 52-week high recently. The company has zero promoter pledge and has seen rising interest from FPIs. Brokers have upgraded target price on the stock. 

UPL

One of India’s largest chemical manufacturer, UPL has shed many of assets to improve its financials. The PE ratio of the stock is low and it has seen a fall in provision in past few quarters.

SRF:

The company’s cash flow has been improving over the past two years, leading to increased interest from FPIs. Brokers have also upgraded their target price on the stock. 

Balaji Amines

A fall from peak prices has made the stock attractive and many analysts see space for upside from current prices. The company has low debt and zero promoter pledge. 

Tata Chemicals

The stock has come under pressure due to weak financials but its current TTM PE ratio is less than past average. The company has low debt and zero promoter pledge. Its RoCE and ROE, too, have been improving. 

PI Industries

The stock’s price is below short-, medium- and long-term averages, but the recent fall has led to buying opportunity, according to many analysts. The company has low debt and zero promoter pledge.

Aarti Industries

The stock price is above short-, medium- and long-term moving averages and has seen increased interest from FPIs. Brokers have also upgraded target price for the stock. 

Deepak Nitrate

The stock has come under pressure in recent times due to pressure on financials. However, its book value per share has improved, leading to target price upgrades from brokerages.  

Gujarat Fluorochemical

The company has low debt and has shown strong annual EPS growth. Its RoCE and and ROE have been improving. However, high promoter share pledge remains a negative. 

Vinati Organics

The stock has seen increased interest from FPIs in the recent past. Its RoCE and and ROE have been improving. The stock is, however, near 52-week low due to fall in MF shareholding. 

Overview of Chemical Industry

The Indian chemicals sector is one of the fastest growing in the world The country is already the sixth-largest chemical producer in world, with a market size of around $185 billion. Various reports anticipate a compounded annual growth rate of 11–12% over the next decade. India is also among the top 15 exporters of chemical.

In May 2021, the government launched Production Linked Incentive Scheme for setting up plants to make Advance Chemistry Cell, Battery Storage, with an outlay of Rs 18,100 crore.

Factors to Consider Before Investing in Chemical Stocks related Stocks in India

While chemical is a fast-growing industry in India, an investor should keep various factor in mind before investing in chemical stocks:

Financials: Check the fundamentals of the Chemcial company that you plan to invest in carefully. The company’s balance sheet and cash flow statement need careful analysis. 

Client diversity: A company must have diverse clients so as to derisk concentration risk. This also includes geographical diversity. 

Technical: One should also look at factors such as moving averages, support and resistance for each stock before investment decision. 

M&A capabilities: A company with good amount of dry powder or funds for potential M&A will have an upper hand in the market.

Government Policies: Initiatives like the 'Make in India' campaign or PLI scheme and changes in environmental regulations can significantly impact the chemical industry.

Global Demand: As many Indian chemical companies are major exporters, global market dynamics and trade policies can affect their performance.

Raw Material: Fluctuations in the prices of crude oil, natural gas, and other raw materials can influence the profitability of chemical companies.

Also read about: Debt free penny chemical stocks

Segments of the Chemical Stocks 

Specialty Chemicals: Companies engaged in this sector produce chemicals for specific functions and applications, often tailored to customer needs. Big Indian companies in this segment include Aarti Industries, SRF Limited, and PI Industries.

Agrochemicals: These companies make pesticides, insecticides, fungicides, herbicides and other chemicals for enhanced crop protection and yield. Big Indian companies in this segment include UPL Limited, Rallis India, and Bayer CropScience.

Petrochemicals: These companies make chemicals derived from petroleum and natural gas, used in the manufacture of plastics, synthetic fibers, and synthetic rubber. Big Indian companies in this segment include Reliance Industries and GAIL (India) Limited.

Pharmaceuticals: While not always directly classified under chemical stocks, pharmaceutical companies are a significant part of the chemical sector, producing active pharmaceutical ingredients (APIs) and formulations. Big Indian companies in this segment include Sun Pharmaceutical Industries and Dr. Reddy's Laboratories.

Dyes and Pigments: These companies make colorants used in textiles, paints, inks, and plastics. 

Basic Chemicals: This broad category includes makers of acids, alkalis, solvents, and other essential industrial chemicals. Big Indian companies in this segment include Tata Chemicals and Gujarat Alkalies and Chemicals Ltd.

Also read about: Best Technology Stocks to Buy in India 2024

Conclusion

Indian chemical stocks represent a good opportunity for investors to participate in India's robust industrial growth and export potential. The chemical sector poised for significant expansion, driven by a diverse range of industries, increasing domestic demand, and favorable government policies. However, as with any investment, it's essential to approach with due diligence, recognizing the nuances of the sector, technical and fundamental analysis of the stock and market fluctuations.