Metal scrips hot on Sterlite stock split, bonus buzz

Non-ferrous metal scrips were on fire on Thursday after Sterlite had announced that it would consider splitting its stock and a bonus issue. The Sterlite scrip had nearly doubled in value in the last three months.

Thanks to increasing metal prices, the company was able to register 68 per cent rise in its third-quarter profits. The stock, which had a book value of Rs 324 in March last year, went up by 6.72 per cent on the BSE on Thursday.

Other stocks such as Hindustan Zinc and Nalco too rose, by 7.5 per cent to 8 per cent on Thursday, with the BSE Metal index having increased nearly 7 per cent in the last week.

"Non-ferrous metal companies are likely to see their profits increase even further," said Jaspreet Singh Arora, metal analyst at Angel broking firm, adding, "as the international prices rise higher."

Aluminium prices surged 34 per cent on the London Metal Exchange over the last one year, hitting a record high of $2,500 this week.

Increasing demand from China and other Asia-Pacific countries have kept metals such as copper, zinc and aluminium dear in the international markets.

In the Indian market too, aluminium prices went up 9 per cent during the last quarter of 2005. Copper prices too are 12-15 per cent higher this year.

While analysts are divided over the possibility of more stock splits, they predict that more profits are in the offing for metal companies.

"There is substantial lag in the demand-supply response. We will see prices to remain 10-20 per cent higher in the coming months this year even if they see their peaks. Only in 2007-08, the new capacity will be able to cater to the increasing demand," Arora said.

Metal stocks showed a strong upsurge in the last month, and the BSE Metal index shot up 9.3 per cent in January, nearly double the Sensex movement during the same period.

Analysts see a breakout for the sector with most of the sector benchmarks having moved merely 6-8 per cent.