Shining Bright! Metal stocks rally up to 25% in a month. Is the time ripe to buy them?
Metal stocks surged nearly 9% on Thursday amid fall in the dollar index after the US Federal Reserve kept rates unchanged while hinting at least three rate cuts next year. While it was okay to keep a positive view on the sector, a wait-and-watch strategy for now is the road forwards, told an analyst to ET Now.
Dollar has declined 2.7% in the last three months, making dollar-priced commodities such as metals a lucrative buy for importers.
As the index hit a new high, state-run Steel Authority of India (SAIL) topped the charts with 8% gains on Thursday. It was followed by National Aluminium Company and Hindalco Industries which rose 6% and 2%.
SAIL has been the top performer in the pack even on a one-month basis as it has risen 25%. Jindal Stainless, Hindustan Copper, JSW Steel, Jindal Steel and Power have also delivered solid returns.
Stocks like National Aluminium Company, Tata Steel, Hindustan Zinc and Hindalco have given positive returns but underperformed the Nifty. On the other hand, Ratnamani Metals and Tubes has yielded negative returns.
Notwithstanding strong buying trends in metal stocks seen on Thursday, a wait and watch policy in metals is recommended by analyst Pankaj Pandey of Head Research, ICICIdirect.com even as he suggests investors to remain positive on this sector.
Amid significant capex that is likely to come into the sector, Pandey expects the government to do its bit to protect the sector in times of unforeseen situations.
«So, one factor which will play for metals is that this sector is going to do a maximum capex of about Rs 11 lakh crore to take the capacity to 300 million tonnes in the next five-six years.
