Metal stocks have become increasingly favored on Dalal Street in 2024, driven by a sustained uptick in base metal prices, bullish outlooks from analysts regarding metal companies, and robust quarterly business updates. This collective momentum has instilled confidence among investors.
In the latest trading session, the Nifty Metal index surged by 2.9% to reach a new all-time high of 9,158 points, contributing to a total return of 14.60% for the year 2024. Notably, this marks the fifth consecutive year of growth for Indian metal stocks.
Among the 15 constituents of the Nifty Metal index, 9 have delivered impressive returns ranging between 20% and 50%, with Vedanta leading the pack. Vedanta’s stock has seen a remarkable increase from ₹258.55 per share to ₹383.45, representing a nearly 50% return since the beginning of the year.
Currently, Vedanta’s stock is trading at its highest level in 24 months. Recently, global brokerage firm CLSA upgraded Vedanta’s rating from “underperform” to “buy” and raised its target price to ₹390, making it the second-highest target after Nuvama’s ₹394.
Similarly, shares of NALCO have experienced significant gains, rising by 23.24% this month alone. This surge follows NALCO’s report of record-high metal sales, cast metal production, and bauxite excavation for fiscal 2024. For the calendar year 2024, NALCO’s stock has witnessed a 43% increase.
SAIL, a PSU firm, has also demonstrated strong performance in 2024, propelled by record annual production and sales in FY24. Increased demand for steel amidst a global manufacturing recovery and ongoing capital expenditure growth in India has further buoyed stock prices. SAIL’s stock has surged by 33.15% year-to-date.
Hindustan Zinc shares have soared by 48% between April 1 and April 12, driven by a robust increase in zinc and lead prices. This surge is expected to enhance company margins, as stable production costs coupled with higher selling prices translate into increased profits per unit sold. Additionally, the rally in silver prices to multi-year highs has further bolstered the company’s shares, yielding a return of nearly 29% year-to-date.
Other metal stocks, including MOIL, Jindal Steel, Tata Steel, NMDC, and Coal India, have all delivered returns ranging between 20% and 25%.
The resurgence in base metal prices, including Copper, Aluminum, Zinc, Lead, and Nickel, this week has been attributed to expectations of rate cuts from the Fed, heightened business activity in major economies like India, and concerns about supply shortages. The ban on metals from Russia by Washington and London has also raised apprehensions about potential disruptions to global supply chains.
Furthermore, reports indicate that major energy trading companies like Vitol Group, Gunvor Group, and Mercuria Energy Group are re-entering the metals market, aiming to invest capital generated from record profits.
Additionally, supply disruptions at Cobre Panama, one of the world’s largest open-pit copper mines, and discussions regarding the Chinese government’s plans to buy nickel for state stockpiles have contributed to market uncertainties and price fluctuations in the metal sector.
