Hindalco Industries rallies 10%, market capitalisation touches ₹1 lakh crore

Hindalco Industries rallies 10%, market capitalisation touches ₹1 lakh crore

Hindalco Industries have surged 15% in the last 5 days on its US subsidiary Novelis' upbeat earnings and plans to raise $1,500 million.

The rally in the stock on July 29 pushed the company’s market capitalisation to ₹1 lakh crore.

Shares of the company were at a 52 week record high at ₹456.45.

Nifty Metals are up 4.5% led by gains in Tata Steel and Hindalco Industries.

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Brokerage firm Target price SMC Global Securities ₹464 ICICIdirect ₹475 Kotak Institutional Equities ₹500

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Market capitalisation of Hindalco Industries crossed ₹1 lakh crore as the stock rallied 15% in the last five days and nearly 10% on July 29.Investors took positive cues from the company’s US subsidiary Novelis that came up with its June quarter earnings this week. Not only did the company give better-than-expected earnings, it announced plans to raise $1,500 million to refinance higher-cost bonds.Shares of aluminium and copper manufacturing company Hindalco surged more than 9%, on July 29, to reach its 52 week record high of ₹456.45.Most of the metal stocks were up on Thursday, while Hindalco Industries remained the top gainer in the batch.Nifty Metals are up 4.5% led by gains in Tata Steel and Hindalco Industries. In the last 30 days, Hindalco Industries’ stock has surged 18%.The company is yet to announce its June quarter results.SEE ALSO: Cognizant guidance gets peer stocks like HCL Tech and Tech Mahindra buzzing

Hindalco, Tata Steel, JSW Steel shares surge today. What’s leading to the metal stocks rally

Metal stocks have been buzzing in the past few sessions, trading at new highs amid earnings announcements and improved business outlook for the sector. Shares of metal and steel companies were pushing the indices higher in Thursday’s session with the Nifty Metal index surging nearly 5%, being the top gainer.

Hindalco share price surged over 10% in trade today, with its market capitalization crossing ₹1 lakh crore mark in the afternoon deals on the BSE whereas Tata Steel and JSW Steel shares rallied over 5%. Following the lead, shares of JSPL, SAIL, NMDC, NALCO also surged as they were up in the range of 3-5%.

A Bloomberg report stated that India’s steel consumption is set to break records this year, reversing the performance in 2020 when demand crashed as the pandemic upended economic activity.

Demand for steel is expected to surge 17% to 110 million tons in the year started April, according to Seshagiri Rao, joint managing director of JSW Steel Ltd. Rising power consumption and mining activity, along with higher tractor and passenger vehicles sales is pushing up demand for the metal, Rao said in an interview to Bloomberg. “We have seen a good revival in the month of June and July," he said. “Construction demand will also pick up after the festive season."

Last week, JSW Steel, India’s most valuable steelmaker, had reported a record profit of ₹5,900 crore for the first quarter amid a surge in the prices of the alloy. The company had reported a loss of ₹582 crore in the corresponding quarter of the previous year.

Domestic brokerage Motilal Oswal in a recent note on JSW Steel stated that while the company’s debt would stay elevated in FY22 despite the strong steel prices and margins, it does not see that as a worry given the expected strong growth in volumes and cash flows led by expansions. It has reiterated its ‘Buy’ rating on JSW Steel stock with target price of ₹840 per share.

On what’s leading the rally, Ravi Singhal, Vice Chairman of GCL Securities said, “Reason for rise in metal stock price can be attributed to these two reasons — metal prices in the international merchandise appreciating more than 100 per cent and Indian government’s focus on infrastructure creating fresh demand for metals, especially for steel. Rise in demand has led to higher book value and revenue generation of these metal companies.”

“In the last one year, metal prices have almost doubled and it is leading to appreciation in revenue collection of these companies. This has helped metal companies to reduce their debt, which has remained visible in their quarterly results throughout the year,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.

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Tata Steel, JSW Steel and Hindalco shares jump as metal stocks rally

Metal prices have almost doubled in one year and has helped metal companies generate more revenue. (Photo: Reuters)

Shares of Hindalco, Tata Steel and JSW Steel have jumped on Thursday after a sharp rally in metal and steel stocks. Metal and steel company stocks have been hitting news high over the past few trading sessions as earnings improve amid an improved business outlook for the sector.

The Nifty Metal Index jumped nearly 5 per cent today and was the top gainer among other indexes.

Shares of Hindalco soared over 10 per cent in early trade today and its market capitalisation crossed Rs 1 lakh crore. At 1:45 pm, the shares of the company were trading at Rs 451.90 on the BSE, up 8.62 per cent.

Tata Steel and JSW Steel were the two other top performers and both rallied over 5 per cent during the morning trading session.

Tata Steel shares were trading at Rs 1,451.95 per share on the BSE, up 6.34 per cent, at the time of writing this article. Tata Steel shares have been gaining for six straight trading sessions and have rallied sharply during the period.

Meanwhile, JSW Steel was up over 4.2 per cent at Rs 751.90.

Read | Sensex opens over 200 points higher, Nifty gains on IT boost

WHY METAL STOCKS ARE RALLYING?

Metal and steel companies have jumped sharply on the share market due to improved quarterly performance and higher demand.

The steel and metal sector companies have gained momentum after a Bloomberg report claimed that the country’s steel consumption is set to break records this year — a stark reversal from the performance in 2020 when demand for the commodity crashed due to the economic devastation caused by the Covid-19 pandemic.

All companies from the sector, especially the top players, are optimistic that steel and metal demand is expected to surge rapidly this year as the economic situation improves.

Metal and steel companies are optimistic about rising power consumption, construction and mining activity, and higher vehicle sales.

India’s most valuable steel manufacturing company, JSW Steel, reported a record profit of Rs 5,900 crore in the first quarter of FY22 as prices of alloys increased sharply. In contrast, the company had reported a loss of Rs 582 crore in the corresponding quarter of the previous year.

Domestic metal and steel companies are also optimistic at the moment as reports indicated that China may soon impose export duties on steel products. Reports indicate that China is considering a hike in import duties — between 10 per cent and 25 per cent — on steel products from August 1.

Analysts suggest that this may help Indian producers capture a chunk of China’s steel market share. The two other key factors are rising global metal prices and the government’s focus on infrastructure development.

Metal prices have almost doubled in one year and have helped metal companies generate more revenue. This has helped the companies to reduce their debt, evident from their FY22 first-quarter results.