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Krishnan Thiagarajan

CONSIDERING the softening price trends of aluminium and copper at the London Metal Exchange, the earnings performance of aluminium and copper majors are poised to suffer in the near term. To a large extent, the sluggish price trends have already been reflected in the relatively poor performance by aluminium majors such as Hindalco and Nalco in the first quarter of 2002-03.

Since the fundamentals of aluminium are fairly strong in the medium term, shareholders with a medium term perspective may contemplate entering into the Hindalco stock at current price levels and use any dip to enhance investment exposure. However, it is recommended that Nalco and Indal shareholders stay invested but avoid fresh exposures. The firm price trends in Nalco have been dictated entirely by the proposed disinvestment and have not remained aligned to its fundamentals for the past few months.

In the case of copper, Indo-Gulf Corporation is the only stock worthy of investment. But since copper has traditionally been more volatile than aluminium, investors may be better off timing the entry into the stock when copper prices witness an uptrend.

Moreover, it is likely that till the merger formalities are completed, Indo-Gulf may move in line with Hindalco's stock price, making it unattractive from a near term investment horizon.

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