Sterlite Industries, Hindalco hit 52-week low on falling copper prices

NEW DELHI: Shares of Sterlite Industries & Hindalco touched their 52-week low on Monday as copper prices extended losses today.

“Copper extended losses as fears of a Greek default stirred worries of a global recession, which could slow industrial use, a scenario underlined by copper’s sharpest weekly fall in nearly three years last week,” according to a report.

Shares of Sterlite Industries touched their 52-week low of Rs 117.10 on the NSE and a high of Rs 122.15. At 10:55 a.m., Sterlite Industries Ltd was trading 4.4% lower at Rs 117.25.

Shares of Hindalco Industries Ltd touched their 52-week low of Rs 128.15 on the NSE and a high of Rs 133. At 10:56 a.m., Hindalco Industries Ltd was trading 4.03% lower at Rs 128.50.

Depreciating rupee also has a deep impact on copper prices as it helps in determining the landed cost of the red metal, which is quoted in dollars.

The partially convertible rupee was at 49.57/58 per dollar, after dropping to 49.69 in early deals and 0.3 percent weaker than its close of 49.42/43 on Friday.

Brokerage Call:

Morgan Stanley in a recent report on metals earlier this month downgraded Hindalco to ‘SELL’ from ‘Overweight’ with a price target of Rs126 and Sterlite Industries Ltd to ‘Equal weight’ or ‘Hold’ call from ‘Overweight’ with a price target of Rs 147.

“Heightened fears of a recession in developed markets and slower growth in emerging markets have given persistent high inflation. We reduce our forecast on aluminum, zinc, and copper for F2012-14 by 5-15%,” said the report.

The brokerage also trims F2012-14 earnings forecasts for Sterlite and Hindalco by 15-33%.

Further, Hindalco Industries and Sterlite’s competitive edge is being blunted due to increased cost and issues over the availability of coal and bauxite resulting from the policy impasse.

Higher downside risk to aluminum prices, likely project delays and rising coal crunch also imply Hindalco may have further downside.