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Nifty Metal declines 23% in just 1 year. Here's why most stocks show double digit fall

Nifty Metal declines 23% in just 1 year. Here's why most stocks show double-digit fall

Nifty Metal declines 23% in just 1 year. Here's why most stocks show double-digit fall
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By Pranati Deva  Jul 31, 2019 1:59:42 PM IST (Published)

The Nifty Metal index has been among the worst performers in the last one year, down nearly 24 percent. It has fallen 20 percent in 2019 alone. In comparison, the Nifty50 fell over 2 percent in the last one year and rose 2 percent in 2019.

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In July, Nifty Metal index has declined 14 percent against the 6 percent fall in Nifty.
Metal stocks have been under pressure and have underperformed benchmark indices on the back of weak quarterly earnings, growing worries about demand slowdown and correction in commodity prices.
In the last one year, Jindal Hisar tanked 48.6 percent, Hindustan Copper lost 47.7 percent, SAIL slumped 46.1 percent, JSPL shed 35.8 percent, Vedanta plunged 33 percent, and JSW Steel fell 29.7 percent.
Other metal stocks like NALCO, MOIL, Tata Steel, Hindustan Zinc, Coal India, APL Apollo Tubes, Welspun Corp, and Hindalco were also down between 10-28 percent in the same period. NMDC was the only stock which was in the green, up 2 percent.
India has been struggling to revive consumer demand and the economy remained sluggish even in June amid a decline in exports. Analysts expect metal stocks to remain weak amid poor earnings for June quarter.
Both Vedanta and JSW reported a sharp drop in profits for the June quarter.
Vedanta posted a 12 percent decline in Q1 profit impacted by low commodity prices and uncertain market environment, while JSW Steel’s profit more than halved on lower prices and as sales declined on weaker domestic demand.
Analysts continue to prefer structurally efficient companies with low capital and operating cost, access to cheap raw material and a strong balance sheet.
Motilal Oswal prefers Hindalco and Jindal Hisar in the sector. It also likes JSPL, which should benefit from capacity addition and revival in the power sector. The brokerage maintained weightage in Hindalco and incrementally added NMDC to its model portfolio.
"Commissioning of NMDC’s steel plant would be valuable given low-cost iron ore, economy of scale and high productivity. Besides, potential renewal of Donimalai mine lease and higher iron prices amid possible near-term domestic supply disruption provide upside to the stock," it said.
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