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:
- Specialty Chemicals
- Pharmaceuticals
- Capital Goods and Engineering
- 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
| Company | Key focus areas | FY25 expected revenue growth | Commentary |
|---|---|---|---|
| Aarti Industries | Agro-intermediates, polymers | 10-12% | Recovery in global orders to aid FY26 earnings |
| SRF | Fluorochemicals, packaging films | 13-15% | Strong global contracts pipeline |
| Navin Fluorine | Fluoro-specialty, CRAMS | 14-16% | Capacity additions to drive medium-term growth |
| Deepak Nitrite | Performance chemicals, phenol | 11-13% | 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)
| Sector | YTD FY25 return | Valuation (PE ratio) | 5Y avg PE |
|---|---|---|---|
| Specialty Chemicals | -8.5% | 27x | 34x |
| Pharmaceuticals | +3.2% | 19x | 22x |
| Capital Goods | +11.7% | 31x | 29x |
| BFSI | +6.5% | 18x | 20x |
Key investment strategies advised
- Accumulate on dips: Focus on market leaders with pricing power and robust balance sheets.
- Diversification: Spread exposure across sectors to mitigate tariff-related or regulatory risks.
- Avoid leveraged names: Rising interest rates and working capital cycles could pressure companies with stretched balance sheets.
- 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.
