Despite the volatility in commodity prices, metal-packed stocks have delivered a net positive return for the third year in a row in 2022.

So far this year, the Nifty Metal index has provided returns of over 23%, led by

which is a multibagger stock.

But 2021 is an even better year, as the Nifty Metal index is the top winner among sectoral indices, providing nearly 70% returns. In 2020, the index is up about 16%.

This year has been a tough year, especially for iron companies, as sharp increases in the prices of raw materials such as iron ore and fuel and electricity costs significantly reduced their revenues.

Most steel companies saw a downgrade in their earnings ratings, even though their profitability was seen improving in the second half of the current financial year.

was the hardest-hit stock this year, losing more than 22% of its value. The main sector also fell year-over-year, albeit slightly.

Aluminum producers such as Dan Co. also provided negative returns this year.

Will stocks sparkle in 2023?

According to most money managers, the metals and mining package is unlikely to lead the market’s gains next year.

However, they expect the selective stock in the package to do well given the positive prospects for business growth.

Steel company shares rallied in the recent session as China’s demand for steel is expected to benefit from the stimulus measures recently announced by the government to help the real estate sector.

“Demand is expected to pick up in the medium term with possible easing of covid policies and improvement in the real estate sector, supported by the recent stimulus announcements,”

Institutional Securities said in a report.

For brokers, Tata Steel remains the top bet in iron packages given its sector-leading spreads in the domestic market. Among non-ferrous producers, prefer Hindalco Industries as the company will see a structural increase in revenue due to arming Novelis.

Meanwhile brokers

keep an eye out for iron packs, preferring &Power and keeping in mind their strong long term product portfolio. Brokers are also positive because, as downstream players, they are relatively protected from adverse price movements.

(Input data from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions provided by experts are their own. They do not represent the views of Economic Times)



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