The Nifty Metal index has gained around 12% in the last five trading sessions as compared to a 2% decline in the Nifty 50. Domestic brokerage house Motilal Oswal believes restrictions on curbs Russia Aluminium, nickel, steel, thermal coal and PCI coal will have a positive impact on prices.
India is a net exporter of aluminum and hence the brokerage believes that companies like Hindalco, National Aluminum Company (Nalco) and Vedanta will benefit from higher aluminum prices. Whereas, Coal India will be the biggest beneficiary of the resurgence in coal demand, and Tata is likely to be the biggest beneficiary of any steel price hike in the EU.
“Our top stock picks Hindalco, Nalco and Coal India are the ones which are expected to benefit from rising commodity prices. We expect steel prices in Europe to pick up and remain elevated, with Tata likely to be the major beneficiary. The major risk to our call is reduction in consumption at higher prices resulting in sharp commodity price correction,” the note added.
Motilal Oswal believes that sanctions on Russia will disrupt the supply chain of many commodities and it may take several months to restore the entire supply chain. Till this happens, the prices are likely to remain bullish.
“Hindalco will benefit immensely from the ban on Russian aluminum as it has strong exposure to both upstream and downstream segments. Nalco is a direct beneficiary of the increase in aluminum and alumina prices due to Russia’s approval.”
According to Motilal Oswal, Vedanta will benefit from many commodities including but not limited to oil, aluminium, zinc and steel. While the company is likely to benefit from the rise in commodity prices, it will also face problems from higher raw material prices, especially coal prices.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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