In July 2025, overseas investors pumped in $130 million into Indian chemical and petrochemical stocks, following a hefty $278 million in June, showed data from NSDL. A year ago, FPIs had pulled out net equity investment worth $61 million from the sector.
The telecom equipment space topped the charts for FPI inflows in July, attracting $570 million in net equity investment, followed by metals and mining with $388 million, and food, beverages and tobacco at $175 million.
While the chemicals and petrochemicals sector saw 11 consecutive months of FPI buying, the telecom sector witnessed a steady inflow of foreign money since December. Metals and mining, along with food, beverages, and tobacco, attracted foreign inflows only in July.
According to NSDL, FPIs were net sellers in the Indian equity markets in July, with a total outflow of ₹17,741 crore.
Investors in chemical companies have been rewarded handsomely. In the year to 12 August, dye maker Indochem topped the list, delivering 308% gains, while specialty chemicals producer Camlin Fine Sciences gave 115%. Pigment manufacturer Kesar Petroproducts (63%), aroma and fragrance maker Privi Specialty Chemicals (59%), and life sciences-focused Anupam Rasayan (52%) also posted stellar returns.
However, in the last one month, most chemical stocks have come under pressure because of US President Donald Trump’s tariffs.
Hikal slipped 20%, while Castrol India and Laxmi Organic eased 4%, Fine Organic and Gujarat Alkalies fell 5%, and Alkyl Amines, Archean Chemical, and Deepak Nitrite were down 7% each.
Linde India dropped 8.5%, Atul 10.5%, and Fairchem Organic 12.5%. Losses were steeper for Aarti Surfactants, Aarti Industries, and Vinati Organics at 15% each, Clean Science at 17%, and Camlin Fine Sciences, plunged 24%.
A few names, however, swam against the tide: Bliss GVS Pharma gained 13%, Tatva Chintan rose 9%, Tata Chemicals added 5%, Sudarshan Chemical climbed 19%, and TGV Sraac surged an impressive 32%.
Now the key question facing investors is whether the momentum in chemical and petrochemical stocks can hold up after US President Donald Trump announced an additional 25% tariff on India, taking the total hit to a hefty 50%.
According to the Indian Trade Portal, India is the sixth-largest chemical producer in the world and the third-largest in Asia. It ranks 14th in global chemical exports (excluding pharmaceuticals), contributing 2.5% to global chemical sales.
Ratings firm Icra, in its August report, said 60% of India’s agrochemicals output is exported, with the US accounting for 18% in FY2025. The US also sources agrochemicals heavily from the EU, Mexico, and China; while the EU now faces a 15% tariff, Mexico’s rates match India’s, and China continues to face 30%.
India is a key US supplier of dyes, pigments, and other chemicals alongside China, the EU, and Mexico. However, tariff advantages for the EU and narrowing gaps with China could increase pricing pressure on Indian exports.
The hope that pharma and healthcare might escape US tariffs had sparked some cheer, spilling over into a rally for chemicals and petrochemicals earlier this year, said Nilesh Ghuge, research analyst at HDFC Securities. But that optimism may be short-lived if Trump goes ahead with extra tariffs, he warned.
“Until there’s clarity, investors might be better off sitting on the sidelines rather than jumping in head-first.” Ghuge sees volumes inching up but says prices may take another couple of quarters to recover.
Research co-head at PL Capital, Swarnendu Bhushan, also remains cautious on the sector and does not see a rebound anytime soon. “Margins are shrinking, volumes are inching up, but prices aren’t recovering, with Chinese overcapacity dumping extra supply into the market,” he said.
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Tariffs could shave off some exports, especially of more commoditised products, said Prashant Vasisht, senior vice president and co-group head, corporate ratings, Icra. Commodity chemicals are high-volume, standardized products—like sulfuric acid or ethylene—made for global and domestic markets. They serve as basic raw materials for other industries and show little difference from one producer to another.
“However, certain speciality chemicals could bear the brunt of tariffs and still maintain volumes,” he added.
Pricey or fair deal?
“Valuations remain lofty for most chemical and petrochemical names, especially with Chinese dumping squeezing margins, but there are still a few decently priced pockets that could quietly deliver alpha,” said Ghuge of HDFC Securities.
Valuations are well above their five-year averages. Tatva Chintan, for instance, is trading at a sky-high price-to-earnings (P/E) of 615.67 versus its five-year average of 477.37. Tata Chemicals (42.6 from 31.48), Gujarat Fluorochemicals (58.02 vs 44.16), Deepak Fertilisers and Petrochemicals (43.52 vs 30.72), Archean Chemical (34.98 vs 25.67), SRF (60.30 vs 47.88), and Aarti Industries (55.50 vs 41.61) are also sporting richer-than-usual multiples.
Market participants point to massive capacity additions in China and a weak global economic outlook as key headwinds, while the positives lie in a healthy domestic demand outlook and a gradual shift in global supply chains towards India.
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Scope for upgrades
Ambit Asset Management’s July newsletter noted that after the boom years of FY20–22, the market expected strong growth for FY22–25, projecting a 23% earnings CAGR and 25% median Ebitda margin. Instead, revenue fell at a -3% CAGR and margins dropped to 13% in FY24, before recovering to 18% in the second half of FY25 as businesses stabilised.
Looking ahead, after the weak FY22-25 period, the market now expects only a modest recovery—18% revenue CAGR over FY25–27, with average Ebitda margins improving slightly to 18% in FY27 from 16% in FY25.
“We believe there is significant scope of upgrades to these assumptions given global channel inventory is at a 5-year low, which suggests restocking led demand; recent pricing up-move indicates strong improvement in margins as well, and resultantly, we believe there is scope for upgrades,” said Ambit Asset.
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