There is a sudden wave of rallies in the paper stocks. The stocks have seen tremendous gains of up to 50 percent in just last 3-4 trading sessions. Since the closing on September 5, the Sensex and the Nifty rose 1.70 percent and 1.73 percent respectively. With the rise in gains, paper stocks like Malu Paper, Ruchira Paper, Star Paper and JK Paper saw a handsome rally.

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In the last three trading sessions, Malu Paper rallied 49.49 percent, Ruchira Paper surged 39.76 percent, Star Paper rose 32.07 percent and JK Paper gained 30.79 percent. Other stocks like Orient Paper and Seshasayee Paper saw 26.39 percent gains, and West Coast Paper rose 18.45 percent.

So why are the paper stocks rising suddenly?

There could be a number of reasons behind the rally in the paper stocks. First, the overall positive sentiment in the Indian market due to positive cues from the global markets on diminishing US-China trade tensions, along with hopes of rate cuts by major central banks.

The second reason behind the rally in paper stocks could be the proposed ban on single-use plastic. In the last quarter, paper stocks remained under pressure due to rising input costs which played out on the margins. With the ban on plastic products, the demand for paper would come back and improve expectations of large capex for the majority of the players.

The Centre has already prepared a list to ban 12 plastic products proposed by the Central Pollution Control Board. On Wednesday, Prime Minister Narendra Modi also spoke briefly on the issue of increasing pollution. He said, “It should be our aim to end single-use plastics in India by October 2, 2020."

Market expert Prakash Diwan said that 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.

First Published:Sept 12, 2019 9:31 AM IST