Is it right time to invest in Chemical stocks or should avoid them

From last many trading sessions, our indexes have seen consolidation within a small range. But one particular sector which has outperformed the market in last few months is Fertiliser and chemical sector. We saw many stocks became active in past few months and many of them have now given more than 300 percent return.


GNFC which is now trading at Rs.360 has gave returns of almost 300 percent in one year, Phillips carbon which was trading around Rs.200 year ago is now trades at Rs.900. Both Graphite India and HEG engage in business of graphite electrode have gave more than 500 percent return in past one year.

Every chemical related theme has its own story and reason for past growth and upcoming future. Whereas prices of graphite electrodes are getting higher, change in government policies have given a boost to domestic fertilisers and chemical manufacturers. Rating agencies have started their coverages on sector with buy rating. Manufacturing of electric cars is also going to be increase rapidly as government has initiated some steps to boost it. Although, this sector is going from many reforms which will be beneficial for this sector for longer term.

But now when stocks have performed so well in past few months, investors wants to know that is it safe to continue holding their investments in sector or book profit. As of now, we can’t ignore that one year ago, these stocks were had very low risk as compared to now when risk level is very high.

As what i have learned so far from my experience is that don’t buy those stocks for short-term where big investor have already played their chance before. Thus, avoid those stocks for short-term where big rally has already came before which decreases the chances of further more buying. However, i think we can see some extended gains till the quarterly results of these chemical related companies.


Although, i think investor who were holding these stocks from very low prices should keep profit booking at major levels. One more option is that book 3/4 of your profit and keep holding remaining for long-term as future of these companies looks very positive. While, those who wants to make fresh position in sector may try with using a stoploss. But remember, short-term position could be risky now.

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