Shares of metal companies saw a strong rally on Monday amid a rise in global prices of base metals like zinc, lead, copper and nickel. Looking at this rally, it seems that the recent rally in the base metals prices has come as a boon for the stocks of these companies.
A sharp rise in metal prices will increase the revenue of metal companies and this will also improve their profits. Sahil Shanghvi of Monarch Networth Capital said, “This rally in metal prices has persisted even after the last week’s hike. All base metals are currently witnessing an increase of around Rs 2,000 to Rs 3,000.”
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Sanghvi explained that the reasons for the reclamation of stocks of HRC (for white goods and autos), rebar (for construction activities with the end of the monsoon season) and the increase in the prices of coal used as raw material. Since then the prices of metals have increased.
He said that for the past few months, the prices of metals have not only remained at their all-time high, but are also crossing their old level.
Credit Suisse reported that aluminum and zinc prices increased by an average of 19% and 29% in the second quarter of FY21. The brokerage has also raised its estimates on aluminum and zinc LME prices. The foreign brokerage has upgraded its rating on Vedanta shares from “neutral” to “outperform” and raised its target price to Rs 420 from Rs 285.
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The Nifty Metal index was up nearly 4 per cent during Monday’s trading and shares of Vedanta, Hindalco Industries, Tata Steel, JSW Steel and Hindustan Zinc. Were trading with an edge.
Apart from this, aluminum giant Alcoa Corporation has recorded its highest net income and earnings per share in any quarter so far. Also, a jump in aluminum prices is helping it sustain its gains. This has also strengthened the shares of Vedanta, National Aluminum Company (NALCO) and Hindalco Industries.
Meanwhile, veteran investor Rakesh Jhunjhunwala has bought shares of NALCO company during the September quarter and this has also increased the market movement for the purchase of this stock. As per the shareholding pattern on BSE, Rakesh Jhunjhunwala held 1.36% stake in NALCO at the end of September. The data also shows that Jhunjhunwala did not hold shares of the company at the end of June quarter just before this.
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Vedanta and Nalco touched their 52-week highs, while Hindalco Industries and Hindustan Zinc hit their all-time highs. Shares of Vedanta, Nalco, Hindalco Industries, Hindustan Zinc, Tata Steel, JSW Steel, NMDC, Steel Authority of India (SAIL) and Hindustan Zinc were trading with a gain of about 3 to 12 per cent today. Some analysts believe that there may be some more upside in metal stocks.
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