The Indian market has been witnessing strong volatility since the beginning of 2021 but few sectors, such as specialty chemicals, have been at the gainers' end.
One stock from the speciality chemicals space - Alkyl Amines Chemicals - has more than doubled in the first 5 months of 2021.
The stock of Alkyl Amines Chemicals has jumped more than 135 percent this year so far against a 6 percent rise in the equity benchmark Sensex.
The strong rally in the stock has made it appear overbought and while the long-term outlook of the stock is positive, analysts hint at taking some money off the table in this counter and look for other opportunities.
Why did the stock rally?
Experts point out that the stock may rise further as the demand scenario of the stock is positive due to the rising demand for amine producers for vaccines.
"The main reason which seems to be driving Alkyl Amines stock is the anticipation of a boost for amine producers for vaccines. With the increased drive for vaccination, amine makers are expected to do well, and this may be the precise reason for such a splendid rally in such times," said Gaurav Garg, Head of Research at CapitalVia Global Research.
Atish Matlawala, Senior Analyst at SSJ Finance & Securities underscored that almost 75 percent of amines are consumed by pharmaceuticals (50 percent) and agrochemicals (25 percent).
Both these industries are doing well and also import from China has not been able to keep pace with rising demand. Therefore, both the volume and prices of amines are increasing.
"Outlook for both pharma and agrochemicals remain strong and hence prices of amines are expected to remain strong in the foreseeable future. Alkyl Amines being the leading producer of amines in India has been delivering improved performance and hence the price of the stock is increasing," said Matlawala.
MFs, FIIs book profit
However, institutional activities of the March quarter suggest MF and FIIs have booked profit in this counter.
The latest shareholding data available with Monecontrol show promoters holding in the stock remained unchanged at 74.13 percent in March 2021 quarter.
FII/FPI decreased holdings in the stock from 0.95 percent to 0.9 percent in the March quarter while mutual funds also decreased holdings from 1.76 percent to 1.4 percent in the March quarter.
"The institutions seem to be investing with caution as the economy now has to face uncertainty and thus it seems like the institutions are lightening their baggage and gauging the headwind before committing funds
again," Garg said.
"However, the decrease in their holding should not be a major cause of concern as this step seems to be their part of profit booking in order to rebalance their portfolios and mitigate risks," said Garg.
What should you do?
Garg pointed out that the stock has witnessed a spectacular rally over the past few days, but it seems to be overbought as of now and fresh buying is not a very good idea.
"Existing investors may hold the stock with a long-term view or book a decent amount of profit and search for new opportunities," said Garg.
Alkyl Amines is the leader in amines in India and is expected to perform well in the medium term.
"The stock in the last few days has moved sharply and made new life high. Investors who want to make fresh investments should wait for some correction," said Matlawala.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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