Although IPCL was late to catch on, it has also given investors decent returns since May 3. In the last fifteen trading sessions the stock has gained more than 40 per cent in value. On Tuesday, the scrip exhausted its daily limit of eight per cent on BSE to close at Rs 119. The counter registered a heavy volume of over 14 lakh shares on the bourse.

Analysts expect the prices to further firm up as the demand in the Asian region is likely to pick up for two reasons. Firstly, most of the Asia-Pacific petrochemicals plants will be in various stages of shut down for annual maintenance till the end of August 1999. Secondly, China,the largest exporter of toys and biggest buyer of polymers, is likely to enter the market sometime in the next couple of months.

Taking a cue from rising Asian petrochem prices, on Monday RIL revised its prices upward in the range of 3.5 to 8 per cent. These revisions are in addition to increases effected earlier in the month. However, analysts point out that this time even the polyester prices, which till now have lagged behind, has been raised by Rs 2000 per tonne (staple fiber by 4.7 per cent and filament yarn by 3.6 per cent).

Although the raw material prices, mainly naphtha, have also been rising (in the last two months naptha prices have gone up by more than 20 per cent) it is unlikely to have any adverse impact on their bottomlines. Both RIL and IPCL are likely to pass on the increases to their consumers. RIL will have an added advantage over other naphtha users as its cracker produces this raw material.

Analysts believe that despite the recent appreciation in the stock prices and rising naphthaprices, valuations are attractive. The stocks, on virtually all measures, continue to trade at discounts to their global industry peers. IPCL is enjoying a PE of 36 times while Reliance is changing hands at a PE as low as 11.3 times.