InvestorQ : Why was there so much enthusiasm seen in the stock of Hindalco and Nalco on Friday?
Katherine Gonsalves made post

Why was there so much enthusiasm seen in the stock of Hindalco and Nalco on Friday?

rhea Babu answered.
3 weeks ago

Two of India’s largest aluminium companies viz. Hindalco and National Aluminium company (Nalco) rallied by more than 2% on Friday. Currently, Hindalco trades at a price of Rs431, while Nalco trades at Rs81.65 per share. Both the stocks rallied on Friday, tracking gains in the prices of base and industrial metals on the London Metal Exchange (LME). On the LME, the benchmark aluminium was up 1.6% at $2,271 per tonne, while copper rallied by 2.5% to $7,811. The fear is that energy shortage could halt production and crimp supply.

The rally was not limited to only Hindalco and Nalco but extended to other metal and mineral stocks as well. For instance, Vedanta surged 2.5% to Rs269. Apart from Vedanta, even stocks like NMDC, JSW Steel, Jindal Steel, Tata Steel and SAIL rallied anywhere between 1% and 2% on Friday. The metal index overall rallied by 1.4% on Friday. For the June 2022 quarter, it may be recollected that Hindalco had reported highest ever quarterly profit of Rs4,119 crore and record sales revenues of Rs58,020 crore.

It has not been an easy journey for these metal stocks as they have had to fight hard against the rising price of raw materials. However, in the case of Hindalco, strong US sales had substantially cushioned the impact of pricier raw materials. However, the global metals scenario may remain challenging as the Russia Ukraine war has not only crimped supply but also demand. Hence, it is not a linear equation like higher demand and lower supply will lead price rises. The actual equation could be a lot more complex in the case of metals.

With its massive infrastructure expansion plans, the Adani group cannot be too far behind. It has already announced plans to invest Rs57,575 crore in setting up an alumina refinery in Odisha. It will also set up a 30 MT iron ore (value addition) project too. For now, one more factor that is holding up the enthusiasm of the metals and mineral stocks is the dovish approach of the Chinese central banks. They are nowhere close to hawkish but are trying to increase liquidity and demand so as to boost domestic output. That has kept metals robust. But the Chinese obsession with zero COVID syndrome has been rather hard to fathom.