Metal shares rally up to 10%; Hindustan Copper, SAIL hit over 12-year highs

The Nifty Metal index hit a new high at 8,984, and was up 2 per cent in Tuesday's intra-day deals. The index has surged 9 per cent in the last one month.

Shares of metal companies were in demand and rallied up to 10 per cent on the BSE in Tuesday’s intra-day trade backed by heavy volumes on hopes of a healthy outlook.

Hindustan Copper, Hindustan Zinc, MOIL and Steel Authority of India (SAIL) surged between 5 per cent and 10 per cent. Hindalco Industries, Vedanta, Tata Steel, Jindal Steel and Power (JSPL), NMDC and JSW Steel were up in the range of 1 per cent to 3 per cent. Most of these stocks were trading at their record or multi-year highs.

At 11:49 am; the Nifty Metal was up 2 per cent hitting a new high of 8,984.40 in intra-day trade. In comparison, the Nifty 50 was up 0.36 per cent. In the past one month, the metal index has outperformed the market by surging 9 per cent, as compared to 1.9 per cent rise in the benchmark index.

Among individual stocks, Hindustan Copper surged 10 per cent to Rs 366.25, hitting over 13-year high on heavy volumes. The stock was trading at its highest level since December 2010. The average trading volumes at the counter more-than-doubled. A combined 46.68 million equity shares changed hands on the NSE and BSE. In the past six months, the stock price of copper company has more-than-doubled or zoomed 145 per cent.

Thus far in the month of April, the stock has rallied 31 per cent after the company said in FY2023-24 Hindustan Copper achieved MIC (Metal in concentrate) production of 27,404 tonne which is the highest in the last five years and 11 per cent higher than last year.

Copper demand is expected to grow in tandem with growth in the Indian economy. The growing demand from the power sector in view of the Government laying thrust on renewable energy and increasing demand from the households for consumer durables will increase the demand for copper in India.

Manufacturers of hybrid and electric vehicles (EV) will also augment the consumption of copper as EVs use four times more copper than traditional internal combustion engines.

Hindustan Zinc surged 11 per cent to Rs 381, hitting a 52-week high on the back of a three-fold jump in trading volumes. Thus far in April, the stock soared 30 per cent as the company recorded highest-ever quarterly refined metal production at 273 kt, up 6 per cent sequentially on account of better plant availability and up 1 per cent YoY.

Shares of SAIL hit over 12-year high of Rs 153.40 as they rallied 5 per cent on the BSE in intra-day trade. The stock is trading at its highest level since May 2011.

Going forward, the boost from the various measures announced by the government in the recent interim budget for infrastructure spending are boosting steel demand in the country. With the overall outlook positive for sustained growth in domestic consumption, the management is hopeful of the resilience and consequently, the margin will improve for the company in the quarters to come.

Meanwhile, on account of greater-than-expected resilience in the United States and several large emerging markets and developing economies as well as physical support in China, global growth is projected at 3.1 per cent in 2024, and 3.2 per cent in 2025, which -- with that 2024 forecast, which is 0.2 per cent higher than that in the last World Economic Outlook, SAIL said in Q3FY24 earnings conference call.

The non ferrous metals sector’s earnings would remain stable in FY2025, considering a steady movement in realisations and an easing of input cost pressure to an extent. According to ICRA, the domestic demand growth is expected to remain healthy at ~10 per cent in FY2025 and would significantly outpace the expected growth of ~2 per cent in global demand. The operating margins of domestic players are seen to remain steady at 17-17.5 per cent in FY2025, like the levels estimated in FY2024. As a result, ICRA maintains a Stable outlook on the sector.

However, according to ICRA, the operating environment of domestic steel producers is expected to remain challenging in the next fiscal as the industry navigates through a period of softness in steel prices, elevated input costs, a temporary deceleration in domestic demand growth close to the Union Elections and a weak external environment.

Consequently, domestic steel consumption growth is expected to slow down to 7-8 per cent in FY2025 (against 12-13 per cent in FY2024E). Nevertheless, ICRA has retained the sector’s outlook at Stable.