10 out of 15 constituents of Nifty Metal Index have become multi-bagger in the last 1 year, moving between 100 per cent to 400 per cent. Let us understand why the sector is in demand.
Among metal stocks, the Nifty Metal Index has gained over 150 per cent in the past one year, while the benchmark Nifty has gained 55 per cent. The bullish trend in the metal index has been driven by a rise in base metal prices amid rising demand due to the opening up of the economy after the COVID crisis. The rise in metal prices would further boost realizations and thus improve their profitability.
Apart from this, many industries like real estate, auto are heavily dependent on the metals sector and the increase in demand in the respective sectors will also prove beneficial for the metals companies.
Issues such as declining demand for the metal in China, production cuts due to power shortages and the Evergrande issue are also potential opportunities for Indian metal companies.
“The issue of Evergrande and the outlook for Chinese metal demand due to power shortages, production cuts and easing of policy measures will be critical to market balance and support prices,” brokerage house Jefferies explained in a recent report.
Going forward, India’s infrastructure development with a focus on smart cities, rural electrification, renewable energy products etc. will continue to demand metal space, making it a good investment opportunity in the sector.
The performance of Nifty Metal Index last year also reflects the increasing interest of investors in this sector. It outperformed not only the benchmark Nifty but also other sectors.
Of the 15 constituents of the Nifty Metal Index, 10 have become multi-baggers in the last 1 year, moving between 100 per cent and 400 per cent.
Let’s take a look at some such stocks:
Adani Enterprises: The stock was the best performer in the Nifty Metal Index in the last 1 year, rising over 400 per cent in this period. In the quarter of June 2021, the company reported a net profit of ₹266 crores against the loss of ₹66 crore in the year-ago period. Meanwhile, consolidated revenue grew more than two-fold year-over-year ₹12,579 crores. In just 2021 (YTD), the stock is up 230 percent. Its market cap is ₹1.7 lakh crore and EPS ₹6.4. Its price-to-earnings ratio is 240.79.
Hindustan Copper: The stock jumped over 300 percent in the last 1 year and 136 percent in 2021 YTD. Recently, the stock has been in focus as the government is contemplating complete disinvestment of its 60.4 per cent stake in the firm. In Q1, the firm posted a year-on-year growth of 53.6 per cent in consolidated net profit ₹45.63 crores. Its market cap is ₹11,500 crore and one EPS ₹1.3. Its price-to-earnings ratio is 91.30.
NALCO: The stock gained 260 per cent in the last 1 year and over 150 per cent in 2021 YTD. NALCO registers significant increase in consolidated profit ₹Q1 vs. 347.73 crore in ₹16.69 crore in the year-ago quarter. consolidated income increased ₹2,506.29 crore from ₹1,413.92 crore in the year-ago period. The company has integrated and diversified operations in mining, metals and power. The central government holds 51.28 per cent stake in the firm.
Vedanta: The stock rose more than 250 percent in the last 1 year and over 120 percent in 2021 YTD. In Q1, the firm registered a 314 percent increase in its net profit ₹4,280 crore vs. ₹1,033 crore in the year-ago quarter on account of higher revenue and better commodity prices. A sustained rise in commodity prices is likely to prove beneficial for the firm. Recently, Credit Suisse also upgraded the stock and increased its target price by 47 percent, demonstrating the potential opportunity in the firm.
Voyage: The stock rose nearly 240 percent in the last 1 year and over 60 percent in 2021 YTD. In Q1, it did . reported consolidated net profit of ₹3,897 crore as against the loss of ₹1,226 crore a year ago. Established in 1973, Maharatna Company’s market cap over . More than ₹49,000 crores.
Apart from these, Tata Steel jumped 230 per cent, APL Apollo Tubes 195 per cent, Hindalco 175 per cent and JSW Steel and JSPL jumped over 110 per cent in the last one year.
The remaining five stocks in the Nifty Metals Index – NMDC, Ratnamani Metals, Coal India, Hind Zinc and Welspun Corp – also gave positive double digit returns between 20 per cent and 75 per cent to their investors.
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