Five metal stocks that delivered more than 140 per cent gains
Compared to a 53 per cent return in the Nifty 50 benchmark, the Nifty Metal index has outshone the broader benchmark index, moving up 133 per cent.
Compared to a 53 per cent return in the Nifty 50 benchmark, the Nifty Metal index has outshone the broader benchmark index, moving up 133 per cent. While some may argue that the rally is due to a supercycle in metals, the fact is that most metal stocks have benefitted from this rally and have delivered superb gains for the investors.
Here are the top five metal stocks that delivered handsome gains:
- SAIL: Shares of SAIL have soared more than 200 per cent over the last 12 months on the back of rising steel prices. As the largest producer of steel in the country, the company was the beneficiary of soaring steel prices, robust demand by various sectors, and the government’s focus on infrastructure as a result of which it recorded its best-ever performance in both production and sales.
- Tata Steel: Tata Steel shares rallied over 250 per cent over the last 12 months as a result of rising steel prices. Tata Steel made debt repayments of Rs 5,900 crore. It has also committed to deleverage further and bring down the debt significantly by the end of FY22. The company has also expressed a commitment to invest Rs 3,000 crore in Jharkhand in the next three years to augment capacities.
- Hindustan Copper (HCL): The rising commodity prices also helped this company which rewarded its investors with a return of more than 200 per cent in the past 12 months. HCL is the only vertically integrated copper producer in the country engaged in a wide spectrum of activities ranging from mining, beneficiation, smelting, and refining.
- JSW steel: As the company’s earnings boosted due to rising steel prices, JSW steel’s shares gave a return of 140 per cent in the past 12 months. It is further planning to raise US$ 1 bn via an overseas bond sale to build capacity and lower fund costs.
- Hindalco: The shares of the company have risen more than 150 per cent over the last 12 months on the back of rising aluminium prices. The company’s strategy of reducing exposure to the global aluminium price fluctuations and increasing the share of value-added products across businesses is playing out well for the shareholders.
Is the metal stock rally a supercycle?
Soaring metal prices have sparked a debate on whether the world is entering a commodity cycle or a ‘supercycle’, an extended phase of abnormally high prices that lasts at least a decade.
Yes, there is a green industrial revolution on the horizon, which will multiply the demand for some of the commodities. However, that does not hold for all the metals.
Lockdowns across the world had created supply bottlenecks and disrupted mining operations, which created scarcity leading to higher prices. This has nothing to do with a supercycle. Moreover, the weakening of the US dollar had impacted the commodity prices as other countries were required to increase the prices to ensure that their revenue does not fall.
In the past 120 years, there have been just four supercycles. They were formed because of the spike in demand coming from industrialising of developing countries.
Even though there is demand for metals, it is a pent-up demand which is temporarily influencing metal prices. Therefore, rather than being a supercycle, it can be said it is a business cycle.