To understand why chemical cos are rising fast, and continue to rise for quite sometime (along with sector like textiles, engineering, manufacturing), one need to understand the global macro changes, that are happening.
Factor #1 - Slowing Dragon
Advantage china was based on 3 major pillar - cheap labor, cheap cost of capital (cheap loan), cheap chinese currency. Off late, all of these 3 advantages are slowly wearing out. There is labor shortage in china, wages are going up. Yuan is appreciating. Banking reform will move interest rate slowly up. This is giving a huge advantage for indian export cos in chemical/textile/manufacturing
Factor #2 - Stricter environmental
control in china
Excessive industrialization in china has resulted in excessive pollution. Now, chineese regulator have suddenly woken up, and started putting stringent env regulations (even directors/CXOs of polluting cos are being thrown into jail). So, as usual, chemical plants are being closed in china, and newer plants are being moved to countries like India
Factor #3 - Advantage india
We are pretty good at chemistry, is a fact that is ignored by many. Though we are poor in RnD, our chemical/api/pharma cos are quite good in process chemistry, and have developed skills to produce chemicals in bulk scale, and compete globally. We have good talent pool in chemical skill.
Factor #4 - The NaMo effect
With coming of NaMo, it is expected that the env/regulatory/red-tape terrorism of upa-2 regime will come to end. Make-in-India implies red-tapes will be replaced by red carpets. So many of govt-created illness of india inc will go away. More FDI/factories in india means more domestic consumption.
Sometime down the line interest rate will also come down.
For textile cos - there are other trigger like Bangladesh’s labour issue, Pakistan’s internal issues, and domestic availability of cotton - which implies more business for indian textile cos.
There are definitely multiple triggers, and stocks are well deservingly getting rerated.