The Hindu Business Line : Metal stocks ride the bull run

Mumbai, Oct. 1 Shares of metal companies seem to have made most of the recent bull phase in the capital market. BSE metal index has gained 2,060 points in the last one month to 12,142 points, an increase of 17 per cent.

The recent rally comes on the back of a pick up in demand for metals in the international markets and rise in prices of commodities such as steel, aluminium, copper and nickel.

Profit booking

Hindalco has gained 23 per cent to Rs 127 in the last one month, Tata Steel 22 per cent to Rs 510, JSW Steel 26 per cent to Rs 852, Uttam Galva 19 per cent to Rs 119 and Steel Authority of India seven per cent to Rs 169. However, profit booking in the last few days has eroded the value of a few stocks marginally.

“The long term outlook for metals sector holds good. Any upward movement in the prices of commodity prices in the international markets will brighten the fortunes of Indian companies as they are interlinked,” said Mr Arvind Rai, an independent metal analyst.

Moreover, many of the metal companies such as Hindalco, Tata Steel and JSW Steel have an international subsidiary, which had hit the consolidated financial performance of the parent company.

Positive vibes

Steel demand, especially from automobile, has improved in the last few months — paving way for companies to hike prices. Besides automobile companies, manufacturers of white goods and consumer durables have also hiked their production stoking up steel demand.

“Domestic offers for flat rolled material have increased again. Further increases are likely to follow as the country enters the festive season when companies offer great packages to woo customers,” said an analyst.

There are also positive vibes from the long products segment. The effective prices of construction steel have also stabilised and orders are expected from the real estate companies. Previously negotiated deals were on a downward trajectory, he said.

Aluminium prices in the London Metal Exchange have recovered 48 per cent from a low of about $1,250 a tonne in February. The recovery was one of the reasons for the run up in Hindalco Industries’ stock price.