In recent times, metal stocks have notably outperformed in the Indian financial markets. The sectoral index as well as many stocks in this sector have regularly set new record highs and consistently achieved significant milestones.
In 2024 year-to-date (YTD), all constituents of the Nifty Metal index have delivered positive returns, with one stock more than doubling investors' wealth. Additionally, all these stocks have shown positive performance over the past one and three years.
Recently, metal stocks have shown remarkable performance, propelled by a substantial rise in industrial metal prices. This surge has bolstered investor confidence, as higher prices are expected to substantially boost companies' profit margins.
The Nifty Metal index has gained over 21 percent in 2024 YTD, surpassing its entire CY23 return of 18.66 percent in six months. In comparison, the benchmark Nifty rose over 10 percent.
Meanwhile, in the last 1 and 3 years, the Nifty Metal index has rallied 58 percent and over 85 percent, respectively, again outperforming the benchmark. In the last 1 year, the Nifty has gained over 27 percent while in the last 3 years, it has jumped 51 percent.
Earlier this month, the Nifty Metal index hit its record high, crossing the 10,000 levels. While the Metal index has been volatile in June so far, down 0.3 percent amid volatility concerning the 2024 Lok Sabha Election results, it had given positive returns in the previous 3 months, up 6 percent in May, 11 percent in April and 4 percent in March. However, the index was flat but in the red in the first 2 months of the current calendar year.
Analysing stock performances for this year so far, Hindustan Zinc has given multibagger returns, surging almost 105 percent. It was followed by Vedanta, which jumped over 68 percent and Jindal Stainless, up over 40 percent. Meanwhile, JSPL, NALCO, and Tata Steel also advanced between 20 and 40 percent. Among other stocks, SAIL, NMDC, Hindustan copper, and Hindalco also rose over 10 percent each.
Ratnamani Metal Tunes, JSW Steel, and APL Apollo Tubes were also positive but up in single digits between 1 and 6.5 percent.
The sharp rise in industrial metal prices can be attributed to a combination of increased demand from growing business activity in major economies and ongoing supply disruptions due to heightened tensions in key metal-producing nations. The recent ban on Russian metals, specifically nickel and aluminum, by Washington and London has further exacerbated concerns about potential disruptions to global supply chains.
Additionally, China's property support measures and better-than-expected industrial data have spurred momentum buying, driving base metal prices higher. The rally has also been supported by banks, miners, and investment funds, who have been highlighting copper’s promising long-term prospects. A surge of investment into the market has helped maintain elevated prices. Moreover, nickel and aluminum prices have also been on a rise.
Going ahead, experts believe that Strong PMI figures in China and robust economic fundamentals in the US have driven up commodity prices. While demand remains resilient, supply issues in copper and aluminum have supported base metal prices. The ban on Russian-origin metals at the London Metal Exchange (LME) has also bolstered aluminum prices. The outlook for metals remains favorable, with potential Federal Reserve rate cuts being a key factor. Additionally, a possible stimulus from China could further drive the rally in metal prices.
IIFL Securities predicted that rising exports from China to the rest of the world could push steel prices lower globally (including India). However, domestic demand is expected to grow 8-10 percent in FY25. Moreover, coking coal prices declined marginally in May’24, while the increase in the Indian steel prices MoM could result in improved margins for steel companies in the coming quarter. However, the recent increases in stock prices of steel companies cap the potential upside. Hence, it continues to maintain a neutral outlook on the steel sector.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
