Metal stocks offered good returns in the pandemic-struck financial year of 2020-21 and are expected to offer a pricing uptrend during the current fiscal as well thanks to increasing demand in the segment. The metals and mining sector also saw an encouraging jump in commodity prices, while steel was one of the best-performing commodities in the just-concluded 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.
According to a report from Axis Securities, the earnings per share (EPS) 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.
Copper storage levels at the London Metal Exchange (LME) 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 Rs669.25 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.
According to SMC Global securities, base metals may continue to trade with bullish bias where buying is expected in Copper (Apr) support holds at Rs667/kg whereas resistance near Rs673. Chinese market is closed today due to public holiday. Stockpiles of the metal in exchange warehouses have been rising steadily. Chilean state copper giant Codelco clinched a deal with workers at its Radomiro Tomic mine after they accepted a new contract offer, defusing worries about a potential strike. China’s Jiangxi Copper Co, aimed to boost copper cathode output by 5.3 per cent year-on-year to 1.73 million tonnes in 2021. Zinc may witness buying pressure and move towards Rs220 per kilogram and taking support near Rs217. Lead also follows the footsteps of other basemetals and may move towards Rs164/kg, while taking support near Rs161. China plans to restrict its use of lead batteries in low-speed electric vehicles (EVs) from September this year in favour of lithium alternatives. Nickel may witness lower level buying, support for counter holds near Rs1,189 per kilogram whereas resistance near Rs1,215. The recent rise in nickel prices may have started to trigger new mine development, but news from China’s Tsingshan Holding Group to produce a large amount of nickel matte in Indonesia eased concerns over battery-grade supply. Aluminum may trade with bearish bias where support holds near Rs176 per kilogram and resistance near Rs180.
Japanese aluminium buyers have agreed to pay the highest premium in six years to get their metal in the second quarter. Rising premiums are a sign of this increased competition for metal..
Bullion counter may witness selling pressure where Gold may find support near Rs44,800 per 10 grams and facing resistance near Rs45,600 while Silver (May) may trade with bearish bias where it may find support near Rs64,500 per kilogram and facing resistance near Rs65,400. Gold prices held steady on Monday, buoyed by concerns over inflation after US President Joe Biden announced a $2 trillion-plus jobs plan last week, while a stronger dollar and elevated US Treasury yields limited bullion's upside. Spot gold was flat at $1,728.60 per ounce. Gold futures edged up 0.1 per cent to $1,729.50 per ounce. The US economy created the most jobs in seven months in March as more Americans got vaccinated and the government doled out additional pandemic relief money, marking the start of what could be the strongest economic performance this year in nearly four decades. Shorter-dated US Treasury yields held near 14-month peak, while the dollar was poised to extend gains against major currencies on Monday after the US Labor Department reported stronger-than-forecast jobs growth in March. Despite the strong numbers the data will not alter the Federal Reserve's stance on monetary policy, Steven Ricchiuto, US chief economist at Mizuho Securities USA in New York said. President Biden's $2 trillion infrastructure plan initiatives that are widely popular, according to a Reuters/Ipsos poll, but US public support declines when the initiatives are packed into a Democratic bill and sold as a Biden-backed plan. Japan's services sector activity fell in March, a private survey showed, but taking some shine off the precious metal were signs that the pace of the downturn was the slowest since January 2020. Money managers in the gold, silver and copper markets cut their net long futures and options positions in the latest week, according to data from the Commodity Futures Trading Commission.
Crude oil may trade with sideways to bearish bias where support is seen near Rs4,450 per barrel and resistance is seen near Rs4,530/bbl. Oil prices edged down in early Asian trade April 5, 2021, after OPEC+ agreed last week to gradually ease some of its production cuts between May and July.
Both contracts settled up more than $2 a barrel after the OPEC+ decision and on optimism about energy demand after U.S. President Joe Biden outlined a $2 trillion infrastructure spending plan. The Organization of the Petroleum Exporting Countries (Opec), Russia and their allies, a group known as OPEC+, agreed to ease production curbs by 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and further 400,000 bpd or so in July. The decision came after the new US administration called on Saudi Arabia to keep energy affordable for consumers despite demand concerns as parts of Europe remained under lockdown while Japan could expand emergency measures as needed to contain a new wave of coronavirus infections. This week, investors are focused on indirect talks in Vienna between Iran and the United States as part of broader negotiations to revive the 2015 nuclear deal between Tehran and global powers.
Natural gas may witness selling and short term support is seen near Rs189/mmBtu, and resistance is seen near Rs196.
- With inputs from SMC Global Securities Ltd