Up to 50% Returns in 2024: Metal Stocks in CY24 Amid Pricing Strengthening in Vedanta, SAIL

Among Dalal Street’s darlings in 2024, metal stocks have surfaced in a year of optimism and strong performance. These equities have surged in value, boosting investor confidence, thanks to persistent gains in base metal prices, upbeat analyst projections, and positive company updates.

The Nifty Metal index hit an all-time high of 9,158 points in the previous trading session, up 2.9%. The rise in Indian metal stocks for the year 2024 resulted in a total return of 14.60%, which is the fifth year in a row of gain.

With its shares rising by about 50% since the start of the year, Vedanta has emerged as the biggest gainer among the Nifty Metal index participants. Vedanta’s shares reached its 24-month high of Rs 383.45 per share today, having started the day at Rs 258.55 per share. The international brokerage CLSA recently upgraded Vedanta from “underperform” to “buy,” with a revised target price of Rs 390 per share, highlighting the strong feeling around the company.

Another strong performer, NALCO, has seen a 23.24% increase in its stock price this month alone. This spike comes after NALCO revealed that its metal sales, cast metal production, and bauxite extraction reached record highs in fiscal 2024, resulting in a 43% rise in the company’s shares for the year.

Backed by record-breaking yearly sales and production in FY24, SAIL’s stock price has surged by 33.15% since the year’s start. SAIL’s performance has been further enhanced by the global industrial recovery and the continuous expansion in capital expenditures in India, which have driven the demand for steel.

Between April 1 and April 12, Hindustan Zinc’s shares increased by 48%, driven by a sharp increase in the price of lead and zinc. It is expected that this jump would improve margins for the corporation, with larger earnings per unit sold coming from steady manufacturing costs and higher selling prices. Furthermore, the increase in silver prices to multi-year highs has strengthened the performance of Hindustan Zinc’s shares, which have returned around 29% so far this year.

In keeping with the sector’s general bullishness, other metal equities, such as MOIL, Jindal Steel, Tata Steel, NMDC, and Coal India, have all produced respectable gains in the 20% to 25% area.

Base metal prices are rising again, driven by supply chain disruptions, positive economic signs, and increased interest from major energy companies. These metals include copper, aluminum, zinc, lead, and nickel.

After a brief hiatus, base metal prices saw a jump this week due to rising expectations of Fed rate reduction, increased economic activity in important markets like India, and growing supply shortfall fears. According to the flash composite purchasing managers index for April, which above forecasts and showed strong economic development, business activity in India jumped to its highest level in 14 years.

In a similar vein, private sector activity in the Eurozone expanded significantly in March. Germany led the way, with its Composite PMI rising to 50.5 from 47.7 the month before, beyond market forecasts. The good outlook for base metals was bolstered by reports of increased commercial activity from other major economies, such as Australia and Japan.

Concerns about possible disruptions to global supply chains have increased as a result of Washington and London’s prohibition on metals from Russia, a significant global source of nickel and aluminum, which has further raised prices. Aiming to invest funds earned from record earnings, many of the biggest energy trading firms in the world, including as Vitol Group, Gunvor Group, and Mercuria Energy Group, are reentering the metals market and growing their metals teams.

The rising trend of basic metal prices has also been significantly influenced by supply-side issues. One of the biggest open-pit copper mines in the world, Cobre Panama, shut down in December, which resulted in a shortage of copper concentrate this year worldwide. This supply interruption has added to the market’s bullish attitude and made scarcity worries already present worse.

Furthermore, despite discussions in the market about the Chinese government’s intentions to buy the metal for state stockpiles, nickel prices hit multi-month highs this week. Concerns about further tighter supply circumstances have been raised by these reports, which has increased prices and boosted investor confidence in the base metals industry.

Analysts are nevertheless upbeat about the prospects for metal stocks in the future, pointing to favorable macroeconomic circumstances, strong demand, and encouraging governmental initiatives as major growth drivers. Base metal prices are projected to continue rising in the next weeks due to a mix of positive economic data, interruptions in the supply chain, and increased interest from significant players in the energy sector.

Notice: The views expressed here are those of individual analysts and may not necessarily represent those of GoodReturns or the author. Before making any financial choices, we advise investors to speak with licensed professionals.