While the Indian benchmark indices have again make a comeback on improved global cues and have past the weakness resulted due to poor GDP number which have come in at a 6-year low. Few of the sectoral stocks have been buzzing and among those are the stocks from the paper segment.
Here's why there is an abrupt uptick in paper stocks
Some of the stocks from the paper space including the likes of Malu Papers, Star Papers , JK Papers, Orient Papers among others have rallied sharply in last 3 sessions.
And the sudden surge in paper stocks is to an extent in line with the positive trend seen in the benchmark Indian indices after there has come calls of resuming talks between the US and China. Also, there have been signs of interest rate cut by major central banks given the concerns around economic slowdown fears world over.
Nonetheless, the primary reason is on expectations of an increased in the demand for paper as the Centre has come out with a list of 12 items of single-use plastic which are to be banned as per the direction by Central Pollution Control Board. To this effect, Prime Minister Modi also spoke on an increase in pollution in the country on Wednesday. The Modi government is aiming to end the use of single-use plastic in the country by October 2, 2020.
Outlook for paper stocks
Experts are bullish on the paper stocks and consider a suitable bet for a term for 2-3 years as with a forecast of higher demand of paper due to ban on plastic item there will be improved sentiment around more capex for most of the players.
Furthermore, the pressure point that these stocks faced during the last quarter due to high input costs and reflected in its margins is likely to ease in the forthcoming quarters.
"The substitution of single-use plastic with other environmentally friendly materials is an inevitable direction that the country will move into, but will be only meaningfully exploited as an opportunity in the longer term", market expert Prakash Diwan is quoted as saying in a leading business daily.