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Tuesday, January 25, 2022

Stocks of metal and mining sector are shocking – investors

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The country’s metals and mining companies such as JSW Steel, Tata Steel, Hindalco and Coal India continue to surprise equity investors through one of the best gains for many years.

The combined market capitalization of the country’s 10 leading metals and mining companies has increased by nearly 11 per cent in April, while the benchmark Sensex has fallen by 2 per cent and the Nifty-50 by 1.3 per cent in this period.

On Tuesday, the BSE Metal Index (which tracks the market capitalization of the 10 leading metals and mining companies) was up 3.5 per cent, while the benchmark indices lost 1.4 per cent.

This has been observed due to increase in the weightage of the stocks of metals and mining sector in the index. The weightage of the four stocks of the metal and mining sector, which were part of the Nifty-50, has now increased to 3.6 per cent, from 2.6 per cent at the end of December 2020 to a record low of 2.2 per cent in June last year.

The combined market capitalization of the country’s 10 leading metals and mining stocks, including Coal India, Tata Steel, JSW Steel, Hindalco, Hindustan Zinc and NMDC, has risen 33 per cent since the beginning of calendar year 2021, while the BSE-500 index gained 7.7 per cent. Is registered

These things indicate a sharp improvement in the fortunes of the industry, which has been underperforming the broader market for most of the last decade. Metal stocks such as JSW Steel and Hindalco are now trading at their all-time highs while Tata Steel’s stock crossed the all-important lows last week. Last Thursday, Tata Steel’s stock touched a high of Rs 953 in the trading session, higher than the Rs 954 price on 29 October 2007, 13 years ago, when the markets rose before the Lehman crisis.

Brokerage firms predict that good times for these sectors will remain in the near future as supply constraints on the global scale are driving up metal and ore prices. The case of boom is the strongest in the case of steel producers.

Analysts at Edelweiss Securities said in their report on the metals sector, domestic steel stocks have given over 20 per cent returns in the last five days. In China, the concept of production cuts and the possibility of a decrease in steel exports etc. and the prices remain strong.

China’s demand contributes more than half of global steel consumption and the COVID-19 has had little impact on the economy. Chinese authorities are closing old steel mills to reduce carbon emissions, leading to shortage of steel supplies globally.

Also, the lockdown caused by COVID has affected mining, production and transportation in the ore and metal producing economy in the last one year, leading to increased supply constraints.

As a result, hot rolled coil prices in China increased by 28 percent in 2021 and more than doubled in the past year. Many traders predict that HR steel prices will cross $ 1,000 per tonne, up from the current $ 817.

The London Metal Exchange index, which tracks the prices of non-ferrous metals such as aluminum, copper and zinc, has soared 15 per cent so far and has risen 67 per cent in the last 12 months.

Higher metal prices are expected to lead to a sharp jump in profits of metal companies in the March quarter. Analysts at Motilal Oswal Securities believe that metals and mining companies will report the best quarterly results so far in the fourth quarter of FY21 and will be ahead of IT services companies.

Return of Indian markets is lower than global markets

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Mirza Shehnaz
Shehnaz Ali Siddiqui is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing around Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.
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