Global investment bank Morgan Stanley has maintained a cautiously selective outlook on the Indian chemical sector, noting continued market constraints. The firm identified pricing constraints and weak demand as the main obstacles affecting the sector’s short-term growth.
Morgan Stanley lowered its target price from Rs 3,295 to Rs 3,000, reflecting weaker expectations amid sector-wide headwinds, but Deepak Nitrite has maintained its “Overweight” rating. The company’s relative strength and long-term recovery potential were recognized by the firm, which made it a favourite stock in the segment.
The firm kept its “Equal-weight” rating for PI Industries and slightly adjusted its target price from Rs 4,300 to Rs 4,310. Limited triggers for a sizable short-term gain are reflected in the neutral position.
Sector Performance in Q2
The Q2 earnings of the chemical industry highlighted a number of problems, such as muted pricing and margin challenges. With no significant recovery anticipated anytime soon, companies were hit with yet another wave of projection reductions and earnings downgrades.
Morgan Stanley highlighted the lack of significant levers to boost profitability as businesses continued to manage demand interruptions and put wallet share ahead of short-term profits.
The brokerage saw some recovery potential in non-agrochemical commodity chemicals, which it deems a relatively better-positioned category than other categories within the industry.
Morgan Stanley maintained a modest level of confidence for 2025 despite acknowledging some early indications of demand stabilization. The firm also warned that the sector’s earnings have not yet bottomed out. Because it can better withstand the current market conditions and take advantage of potential future growth, Deepak Nitrite continues to stand out among its stock selections.
A balanced perspective is presented in the research, which advises investors in the chemical industry to exercise caution while monitoring changing market conditions.
