Metal scrips up 9% on FII flows

The metal sector stocks, a relative underperformer until last month, was the fastest gainer on Monday buoyed by a surge in inflows from international commodity funds.

The Bombay Stock Exchange's metal index skyrocketed by 9.16 per cent or 1,358.74 points to close at a record 16,200. According to brokers, the industrial production data released by the Central Statistical Organisation on Friday was another trigger.

After an unexpected steep drop in July, Index of Industrial Production (IIP) regained momentum once again in August on account of improved output of manufacturing and mining coupled with significant growth in the mining industry.

This quarter, the mining sector growth rate is robust at 17.1 per cent compared with 1.7 per cent in the corresponding month the previous year. There has been a growth of 19.1 percent in Basic Metal & Alloy Industries.

According to analysts, the cheap valuations of companies involved in mining activities coupled with ample liquidity in the stock markets resulted in metal stock prices shooting skywards on Monday.

Says Rajen Shah, chief investment officer Angel Broking, "Although nothing has changed overnight in this sector, we are expecting 9-10 per cent of volume growth for the next year and there mining industries would get fairly valued."

Brokers also point out that in the past couple of months the foreign institutional investors have invested substantially in power, oil & gas, telecom and infrastructure stocks, which have moved up dramatically.

However, considering the global commodity prices including the metal prices are not likely to come down shortly, and therefore most of the metal companies would see robust profits.

Other gainers in the metal pack were steel shares, amid expectations of robust July-September earnings. SAIL, one with the largest mining activities in the country, was the top gainer among metal stocks. It was up by 15.41 per cent at Rs 258.75 and was the top Nifty gainer.

Other top gainers included Sterlite Industries, Sesa Goa and JSW Steel. Sterlite soared 14.37 per cent to Rs 931.20 on speculation that the company was planning to demerge its power unit.

Sesa Goa was up 13.16 per cent to Rs 3,317.90 as its iron ore exports are fetching good prices, especially to China at $130 per tonne. It has also revised term contract with buyers at very high prices. JSW Steel was up 12.05 per cent at Rs 991.35.

Tata Steel and Hindalco were the top gainers among other Sensex constitutes. Tata Steel was up 7.46 per cent at Rs.911.40, while Hindalco was up 5.56 per cent at Rs 188.85.