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What Are Chemical Stocks?
As an investor or trader, you invest to grow your money. That’s why you should find good stocks for investments. You can easily lose your money by failing to invest in the right stocks. Ensure to research on best investment opportunities before you risk your capital.
If you look forward to investing in the most thriving industry in India, chemical stocks will be a good option. The industry is diversified and covers more than 80,000 chemical commercial products. Besides, the sector is expected to hit 304 billion USD by 2025, which presents you with a great opportunity to grow.
Chemical industry is closely linked with other many industries like oil. Many of those industries produce plastics and polymers from petrochemicals, which are then used by companies to make consumer goods like tires, trucks and cars. Chemical are also used in food industry and paints. Due to those interconnections, the chemical stocks are cyclical in nature and investing in them can pay off well.
Are you wondering what exactly chemical stocks are? Well, there are many companies in India dealing with chemicals and chemical products and offering shares of their company. Buying those shares allows you to own a fraction of the company, which grows the money you invest when the company makes profits.
Future of Chemical Stocks in India
Over the last year, India's chemicals sector stocks have turned into multi-baggers for both small caps and large caps stocks, outperforming other sectors by a wide margin. Also, India holds a big position in the import and export of chemicals at the global level and is ranked the fourth-largest agrochemical’s producer worldwide. Heavy investments and capacity expansion in the specialty chemical industries are taking place in India, which is likely to increase chemical sector stocks.
Focus shifts from China to India have benefited the chemical sector in India. For a long time, China has dominated the chemical market around the globe. But due to environmental concerns in the country, companies have scaled-down chemical activities. Therefore, industries consuming chemicals from China have focused on India for supplies. As a result, Indian companies are investing heavily in value-added products leading to increased chemical stock share and the trend indicates future growth in the sector.
High domestic demands of chemical products in India are also likely to surge chemical sector stocks. The middle-class population is fast expanding, causing a dramatic change in demand for transportation, clothing, and food. Such growth in the end-user industry is driving demand for specialty chemicals in the country, contributing to growth in chemical stock share.
Best Chemical Sector Stocks to Buy for Long Term Investment
Pidilite industry limited is known for the best adhesive and sealants products. Also, the company produces construction chemicals. Pidilite earns 50% of its revenue from the production of adhesive, which commands about 70% of the market share in India.
Being a debt-free company, you should consider it for investment if you want to invest in chemical stocks. Pidilite has a good performance track record. Over the last 10 years, the company has grown its sales at the rate of 11% CAGR and 14 percent profit.
SRF deals with specialty chemical intermediaries. SRF derives a large percentage of its revenue (43%) from the chemical business. Apart from that, SRF has gotten 50% of its revenue from its textile investment.
The company has grown its compound annual growth rate by 13% within the last five years. And with the high return on equity (19%), SRF becomes one of the best chemical sector stocks you can invest in for long-term gains.
Deepak is among the leading specialty chemicals producer in India. Much of the revenue for the company comes from specialty and basic chemicals, phenolic, and performance products.
Over the last five years, the company has posted a profit growth rate of about 64.8% CAGR. Besides, that, Deepak has enjoyed about 36.7% return on capital employed with the last 3 years. That makes Deepak part of the best chemical sector stocks in the country.
Is it Worth Investing in Chemical Stocks?
Investing in chemical stocks gives you an ownership stake in the company like a common shareholder. You’re allowed to vote on company issues and receive dividends payout, which gives you a stream of income on top of stocks' market value. Looking at the chemical sector share list from Pidilite, with 0.35% dividends, Deepak, 0.23%, Aarti, 0.17%, and Tata chemicals with 1.25%, that indicates the significance of investing in chemical stocks.
Chemical stocks are considered a risk asset that can give you growth and good income on any investment portfolio. Therefore, take your time and learn stock market basics before investing. Make sure to look at individual securities you want to invest in and the link with the broader economy to choose the right stock. You should avoid investing blindly. Focus on identifying factors that drive your stock, to invest on the most secure and profitable stock.
When considering chemical stocks, look at the degree of risk before you invest. That helps you place your capital in a less risky stock. Making an investment is about taking risk. You should always be willing to take the risk to get returns. But invest your surplus fund only. Never invest what you cannot afford to lose, since chemical stock market is risky.
Chemical stocks in India are experiencing growth due to the rising demand for chemical products. Banning of chemical industry activities in China has also made India focus on many consumers of chemical products. That has led to a rise in market share in the country and across the globe, which is giving stock owners good returns on their investments. When seeking to invest in chemical sector stocks, make sure to go for the well-established companies that offer good returns.