“The current upmove in metals is more of a catch-up rally after having underperformed for a while,” said Hemang Jani, head, equity strategy, broking and distribution,
. “What has fuelled the interest in metals is a mix of decline in the Dollar index and events in China.”
As many as 12 Chinese cities reportedly loosened Covid-related restrictions, a positive sign for an economy that has been grappling with strict virus measures for over two years. China is the top importer of various metals and minerals.
Jani expects another 5-10% rally in these stocks even though predicting the medium-to-long-term path for the sector remains tricky. , Power, Hindalco, and are his top picks.
Hindalco’s shares closed at ₹481.45 on the BSE, helping it turn positive for the year after losing half its value between April and June this year. The stock touched a high of ₹636 in March-end and came crashing – mirroring a sell-off in India and global equities – as the US Federal Reserve and global central banks began to tighten monetary policies to rein in inflation.
“Still early days,” said Pankaj Pandey, head of research,
. “China easing restrictions and opening its economy is positive news for the global economy which will have a positive rub-off on commodities and Indian metal companies.”
Indian companies trade around 5-6 times their one-year forward EV-to-ebitda. “Valuations are not a challenging factor, but the outlook for metal companies is more important,” he said.
and Hindalco are his top picks, said Pandey.
On Monday, state-owned Nalco rose 2.8% while
rose 2.1%. China is the world’s largest producer and consumer of coal.
In November, the government removed the export duty on steel and iron ore, which came as a relief to investors. But, analysts do not expect the scrapping of export duty to revive the prospects of the sector.
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