Metal stocks outperform broad markets in last one month

MUMBAI: Metal stocks posted smart outperformance to the broad markets in one month ended August 23. ET Metal Index climbed 9.4% as compared to 9.97% loss posted by CNX Nifty. Tata Steel and Hindustan Zinc were the prominent gainers among metal pack.

Tata Steel rose 23% as investors turned positive on stock after the first quarter earning announcement. Tata Steel Q1 consolidated EBITDA at Rs 36.9 billion (up 8% YoY) surpassed consensus estimate of Rs 31 billion, due to better performance in Europe. Hindustan Zinc climbed as divestment process of government's stake in this company gained momentum. In one month this stock delivered 11% returns. Shares of Hindalco though remained flat over last one month, the stock posted a smart recovery from a low of Rs 83 recorded on August 7 to Rs 103. Promoters' decision to increase their stake in Hindalco has rejuvenated investors' interest in the stock.

After the first quarterly earnings many analysts have become positive on select stocks in metal sector. Angel Research expects steel companies to increase the prices in second half of the current financial year, though the domestic demand may remain weak. A point to note is imported steel has become dearer due to depreciating rupee offering some pricing power to domestic steel manufacturers. Angel Research puts a buy on NMDC (Rs 142), Hindustan Zinc (Rs 143) and Tata Steel (Rs 328). Numbers in the bracket connote the target prices of respective stocks.

nikhil.walavalkar@timesgroup.com