Contrarian Bet: Turnaround in The Chemical Industry

Once touted as top gainers during the corona virus pandemic period, chemical stocks now face a prolonged downturn, offering reduced valuations that attract investors. Mandar Wagh delves into the industry’s downturn, current financial performance and future prospects to assess if investing in these stocks as a contrarian bet is wise.

A majority of individuals demonstrate a high adaptability to the ‘go with the flow’ mindset, showcasing a shared psychological inclination to conform to prevailing trends in their surroundings. This can manifest in various aspects, such as adopting the latest fashion styles, engaging with trending content on social media, or even mirroring the investment sentiments of the majority in financial markets. This collective sentiment often results in significant buying or selling activities, driven by the prevailing optimism or pessimism surrounding a particular stock or sector, as the majority of investors tend to align their actions with the same sentiment.

However, just as in life, there are rebels in the market who employ the ‘contrarian strategy’ in investing. This approach involves deliberately going against the current market trend, opting to sell when others are buying and buying when the majority is selling. These contrarian investors seek opportunities during moments when the market sentiment diverges from the perceived reality, aiming to capitalise on potential reversals or undervalued assets that others may overlook. For example, numerous investors perceived IT stocks as favourable contrarian opportunities and initiated investments based on their individual risk appetites. Recently, there has been a shift in fortune for IT stocks as global recessionary concerns have eased.