Why Hindalco, Nalco, Vedanta, Other Metal Stocks Are Falling And What Should Investors Do Now? – News18
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Hindalco, Nalco, Vedanta, and other metal stocks declined for the second consecutive session on February 25; What should investors do now?
Metal Stocks Fall In Tuesday’s Trade
Metal Stocks Fall For 2nd Straight Session: Hindalco, Nalco, Vedanta, and other metal stocks declined for the second consecutive session on February 25, driven by rising uncertainties around tariffs and muted third-quarter earnings for the current fiscal. The Nifty Metal index fell by 1.2 per cent, with 11 out of its 15 constituents in the red.
Analysts anticipate continued volatility due to the shortened trading week and the impending derivatives expiry, factors that historically intensify market swings. On Monday, the index dropped sharply by 2.17 per cent, following five straight sessions of gains between February 14-21, where the sector had risen over 5 per cent on optimism about robust domestic demand and easing raw material costs.
The sector’s correction also reflects broader market caution, which has contributed to selling pressure on major stocks like Tata Steel, JSW Steel, and Hindalco. Tata Steel recently noted that while domestic demand remains strong, global volatility and ongoing cost pressures are challenging resilience in the sector.
Krishna Appala, Senior Research Analyst at Capitalmind Research, explained that a strengthening US dollar and the Federal Reserve’s stance on fewer rate cuts in 2025 have put pressure on global industrial metal prices, especially steel and copper. For India, which heavily depends on imported raw materials, the depreciation of the rupee is increasing input costs, thus squeezing margins for domestic metal companies. Additionally, muted Q3 FY25 earnings, coupled with rising coal and iron ore prices, have added to the pressure. However, Appala views this correction as a short-term blip rather than a long-term downturn.
Hindalco was the worst performer in the sector, dropping nearly 4 per cent to an intraday low of Rs 617.30. National Aluminium Company (NALCO) fell by 3.6 per cent to Rs 182.70, marking an 8.56 per cent drop over the last two days. Vedanta and Jindal Stainless also saw losses of up to 3 per cent.
Karthick Jonagadla, Founder & CEO of Quantace Research, identified several factors behind the sell-off in metal stocks: US tariff threats, with the possibility of a 25 per cent tariff on steel and aluminum imports, are weighing heavily on sentiment. The risk of retaliatory tariffs on BRICS nations further adds to the negativity. Additionally, the shift in trade routes and concerns about oversupply—particularly from China’s surge in steel exports to India—are exacerbating the pressure on domestic steel prices.
Investors are also waiting for potential safeguard duties on Chinese steel imports, which may range from 15-25 per cent.
What Should Investors Do?
Currently, the market is pricing in a 16.5 per cent decline in commodity prices for Nalco, an 11 per cent drop for Vedanta, and a 9.8 per cent increase for Hindalco, according to Emkay Global’s latest analysis. The brokerage recommends ‘Buy’ ratings for Vedanta and Nalco with target prices of Rs 575 and Rs 275, respectively, and a target of Rs 550 for Hindalco.
Emkay notes that Nalco’s stock is factoring in an alumina price of $450 per tonne, and it sees a potential upside for Nalco and Vedanta with Ebitda upgrades of 16.8 per cent and 4.4 per cent, respectively, should spot prices hold steady throughout FY26.
Aluminium prices have reached Emkay’s target of $2,700 per tonne following the EU’s ban on Russian aluminium imports. At the current price levels, Emkay expects Hindalco, Vedanta, and Nalco to generate upcycle profitability and returns, with valuations considered attractive relative to the strength in metals.
Hindalco, Vedanta, and Nalco are currently trading at FY26E EV/Ebitda multiples of 6.2, 4.8, and 5.5, respectively. Emkay’s preferred stocks are Nalco, followed by Vedanta and Hindalco, with all three stocks poised to generate upcycle profitability based on strong metal prices.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
