Top 10 metal stocks wipe out 2.63 lakh crore from investors' kitty; time for cherry-picking?

New Delhi: Equity markets have been facing a tough time lately, amid the rising volatility on the back of rising inflationary and economic slowdown fears. The changed macroeconomics dented prospects for cyclicals, including metals.

The top 10 metal and mining companies have tumbled 10-50 per cent from their 52-week highs and need to rally up to 90 per cent to revisit their previous glory. These stocks cumulatively eroded investors' wealth worth Rs 2.63 lakh crore from their respective 52-week peaks till the end of the September quarter.

The list includes state-run metal companies like National Aluminium (Nalco) and Steel Authority of India (SAIL), which have tumbled 46 per cent and 42 per cent, respectively. They are followed by Vedanta and Hindalco Industries, which have plunged 39 per cent each, followed by country's largest steel maker Tata Steel, which is 30 per cent down from its 52-week high as of September 30.

NMDC (down 27 per cent), Jindal Steel & Power (down 26 per cent) and JSW Steel (down 20 per cent) have also made it to the list. Coal India and APL Apollo Tubes also shed 12 per cent and 9 per cent, respectively.

"I have been underweight for the last year. We are looking at deceleration in the manufacturing sector across the world," said Dhananjay Sinha, Director & Head of Strategy Research and Chief Economist, Systematix Shares and Stock.

If you look at the PMIs in developed markets, in Europe, the US and China, there has been significant deceleration and a marked contraction as well in major countries, he added.

Market analysts believe that the demand for metal is likely to remain under pressure. Steel prices have corrected up to 50 per cent in various global markets. Even Zinc, aluminium and other metals have been feeling the heat.

India has imposed a 15 per cent export duty on steel, Sinha said. "There is a glut in the domestic market, and we are seeing steel imports are also happening from China."

He said there is intense competition going forward because when global central banks are fighting inflation, commodities do not do well. "Commodities in general and metals are underweight, and steel and metal stocks are sell-on-rise."

Other brokerages also remain negative on metal stocks. Domestic long products have started sliding in the Indian market after a reduction in thermal coal and iron ore prices that had been pivotal in supporting secondary prices in a weak demand scenario, said Motilal Oswal.

Nomura, in its latest report, said that hot-rolled coil (HRC) spreads remain flat, and the rise in steel prices is offset by increasing coking coal prices.

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