Metal stocks turned out to give the best returns in the pandemic-struck FY 2020-21. Analysts now feel the bull run is likely to continue with a pricing uptrend in the segment and increasing demand in the segment.
The metals and mining sector also saw a sharp increase in commodity prices and steel was one of the best-performing commodities in the just-ended FY21.
The S&P BSE Metal index has surged 176 per cent in the past one year.
Stock price of some of the major metal stocks Tata steel, JSW Steel and Hindalco Industries surged 240 per cent, 263 per cent and 294 per cent respectively.
An Axis Securities report noted that the earnings per share of metal stocks on the Nifty rose by 54 per cent after the third quarter of the last fiscal.
Noting that metals will report one of the best earnings trends, the report said that it is quickly getting factored into the prices.
“The metals and mining sector has seen a significant pricing uptrend as Chinese data has improved and dollar weakened. This trend is likely to persist in the medium term and metal stocks are likely to perform well,” it said.
Metal futures which also were largely on a bull run in the last fiscal, are likely to stay in the uptrend going ahead, analysts said.
Steel prices rallied by 41 per cent in 2020, the Axis Securities report said.
Copper futures increased 26 per cent in 2020 and 11 per cent in the past one month.
Kshitij Purohit Lead, International & Commodity at CapitalVia Global Research Limited in a recent report noted that copper storage levels at the London Metal Exchange have decreased giving a deficit on supply side due to which prices may rise when combined with heavy volumes, capping the downside move in the metal.
The April contract of copper on the Multi Commodity Exchange (MCX) last closed at Rs 669.25 per kg.
On lead futures, he said that bullish momentum in the metal is expected to continue in the upcoming session.
The April contract on Thursday ended at Rs 162.85 per kg.