4 Sectors Offer Attractive Valuations Despite Tariff Challenges; Specialty Chemicals Remain A Top Pick: Jaiprakash Toshniwal

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Mumbai, July 7, 2025: Prominent market strategist Jaiprakash Toshniwal has identified four key sectors offering attractive investment opportunities despite the looming uncertainties around global and domestic tariffs. In his recent interaction with market analysts and portfolio managers, Toshniwal underlined that specialty chemicals remain a structural growth story, while three other sectors also trade at reasonable valuations offering favourable risk-reward profiles.

Sectors with favourable valuations

According to Toshniwal, the four sectors currently offering good valuations relative to their growth potential and historical averages are:

  1. Specialty Chemicals
  2. Pharmaceuticals
  3. Capital Goods and Engineering
  4. Select BFSI sub-segments

He cautioned that while tariff issues remain a concern for Indian exporters, particularly in chemicals, engineering, and textile segments, long-term structural drivers are intact, and current market corrections provide accumulation opportunities for investors with a 2-3 year horizon.

Specialty chemicals: sector overview

Toshniwal emphasised that specialty chemicals remain his top sectoral pick despite recent weakness driven by tariff-related concerns in Europe and the US. He said:

“The valuations of specialty chemical companies have corrected meaningfully from their peak. Global clients are committed to China+1 and India+1 diversification. The current environment is ideal for accumulation of high-quality chemical names with strong R&D pipelines, diversified export presence, and prudent capital allocation.”

Key specialty chemical companies highlighted

CompanyKey focus areasFY25 expected revenue growthCommentary
Aarti IndustriesAgro-intermediates, polymers10-12%Recovery in global orders to aid FY26 earnings
SRFFluorochemicals, packaging films13-15%Strong global contracts pipeline
Navin FluorineFluoro-specialty, CRAMS14-16%Capacity additions to drive medium-term growth
Deepak NitritePerformance chemicals, phenol11-13%Diversification into new molecules continues

Tariff concerns remain but upside is visible

The recent imposition of anti-dumping duties on select Chinese chemical imports by the US has indirectly benefited Indian players. However, EU’s stricter environmental compliance and tariff regimes are impacting some intermediate exports. Toshniwal noted that companies with:

✅ Strong backward integration
✅ Zero liquid discharge facilities
✅ High-end differentiated product portfolios

are better placed to absorb volatility and expand margins.

Pharmaceuticals: valuations bottoming out

The pharmaceuticals sector, particularly mid-cap formulations and API players, is witnessing valuation comfort after prolonged underperformance. Factors driving this include:

  • Recovery in US generics pricing environment
  • Rising domestic chronic therapy growth
  • Increased government focus on bulk drug parks and PLI incentives

He advised looking at companies with clean compliance track records and upcoming niche launches in complex generics and biosimilars.

Capital goods and engineering: cyclical tailwinds

Toshniwal stated that despite the risks from import tariffs on certain engineering products, India’s capex cycle remains strong. Order books of major EPC and industrial machinery companies continue to grow, driven by:

✅ Government infrastructure push
✅ Private sector capacity additions in steel, cement, and renewables
✅ Export opportunities in process equipment and engineering services

Key picks in this space include:

  • Larsen & Toubro (L&T)
  • Thermax
  • ABB India
  • Cummins India

BFSI: selective opportunities

Within BFSI, he identified selective opportunities in mid-sized private banks and NBFCs focused on rural lending and gold finance. Current valuations remain reasonable compared to historical levels, with improving credit growth and asset quality trends.

Market outlook

Toshniwal expects near-term volatility to persist due to:

  • Global tariff decisions in the US and EU
  • Ongoing geopolitical tensions affecting commodity prices
  • Domestic election-related policy uncertainties

However, he remains constructive on equities as an asset class for FY26, citing India’s robust macro fundamentals, stable government, and manufacturing-led growth.

Sectoral performance snapshot (YTD FY25)

SectorYTD FY25 returnValuation (PE ratio)5Y avg PE
Specialty Chemicals-8.5%27x34x
Pharmaceuticals+3.2%19x22x
Capital Goods+11.7%31x29x
BFSI+6.5%18x20x

Key investment strategies advised

  1. Accumulate on dips: Focus on market leaders with pricing power and robust balance sheets.
  2. Diversification: Spread exposure across sectors to mitigate tariff-related or regulatory risks.
  3. Avoid leveraged names: Rising interest rates and working capital cycles could pressure companies with stretched balance sheets.
  4. Watch global trade policies: US elections and EU regulations will remain key triggers for trade-sensitive sectors.

Conclusion

Toshniwal’s insights reiterate that despite current market challenges, secular growth stories remain intact in specialty chemicals, pharma, capital goods, and selective BFSI segments. Investors adopting a staggered buying approach with a long-term horizon stand to benefit from attractive valuations and India’s continued economic resilience.


Disclaimer: This article is for informational purposes only. Investments in equities are subject to market risks. Readers are advised to consult certified financial advisors before making investment decisions based on their individual risk appetite and financial goals.

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