It’s a hat-trick for the metal pack! Will it glitter in 2023 as well?

Notwithstanding the volatility in commodity prices, stocks in the metal pack have given net positive returns for the third consecutive year in 2022.

Year-to-date, the Nifty Metal index has given more than 23% returns, led by Adani Enterprises which became a multibagger stock.

But 2021 was an even better year for the pack, as the Nifty Metal index was the top gainer among sectoral indices, giving a return of close to 70%. In 2020, the index gained about 16%.


This year has been a difficult one, particularly for the ferrous companies, as a sharp rise in prices of raw materials such as iron ore and fuel and power expenses dented their earnings significantly.

Most steel companies saw earnings downgrades, even though their profitability is seen improving in the second half of the current financial year.

Steel Authority of India was the worst hit stock this year, losing more than 22% of its value. Sector major Tata Steel too, is down year-to-date, albeit marginally.

Aluminium producers such as Hindalco Industries and National Aluminium Co have also given negative returns this year.


Will stocks glitter in 2023?
According to most money managers, the metal and mining pack is not likely to lead the gains for markets next year.

However, they do expect selective stocks within the pack to do well given the positive business growth prospects.

Steel companies’ shares rallied in the recent sessions as Chinese steel demand is expected to benefit from the recent stimulus measures announced by the government to aid the real estate sector.

“Demand is expected to improve in the medium term with likely easing of covid policy and improvement in the real estate sector, backed by recent stimulus announced,” JM Financial Institutional Securities said in a report.

For the brokerage, Tata Steel remains the top bet in the ferrous pack given its sector-leading spreads in the domestic market. Among non-ferrous producers, it prefers Hindalco Industries as the company will see a structural pick up in earnings due to arm Novelis.

While brokerage ICICI Securities remains cautious on the ferrous pack, it prefers Jindal Steel & Power and Shyam Metalics given their strong long products portfolio. The brokerage is also positive on APL Apollo Tubes as, being a downstream player, it is relatively insulated from adverse price movements.

(Data inputs from Ritesh Presswala)

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