Vedanta, Tata Steel, Hindalco— Why are metal stocks rising? What should you buy from the sector?

Most metal stocks have posted strong gains in recent days, lifting the sectoral index, which had been under pressure for five consecutive months.

As of March 18 close, the Nifty Metal index has gained about 10 per cent this month, significantly outperforming the Nifty 50 index which has risen a little over 3 per cent.

Some of the index majors such as Vedanta (up 17 per cent), Tata Steel (13 per cent), Hindustan Zinc (12 per cent), Jindal Stainless (11 per cent), Adani Enterprises (10 per cent) and Hindalco (10 per cent) have seen robust gains this month.

Barring APL Apollo Tubes, which is down about 0.40 per cent, all components of the Nifty Metal index are in the green this month, with gains ranging from 4 to 17 per cent.

However, the metal index is still 12 per cent down from its 52-week high of 10,322, which was hit on October 3 last year.

On a monthly scale, the Nifty Metal index has remained in the red from October 2024 to February 2025, cumulatively losing over 19 per cent.

Why are metal stocks rising?

Experts attribute the recent rise in the metal stocks to signs of economic recovery seen in the Chinese economy and expectations of a safeguard duty on steel in India.

Government body the Directorate General of Trade Remedies (DGTR) on Tuesday recommended a 12 per cent safeguard duty on certain steel products for 200 days.

“Metal stocks are gaining traction, driven by China’s recovery, expectations of a safeguard duty on steel in India, and strong aluminium prices,” said Ajit Mishra, SVP of research at Religare Broking.

“The Asian steel spread remains approximately 20 per cent below its long-term average, indicating potential for further expansion. Indian steel prices have climbed 5% from their December lows, and the introduction of a safeguard duty could further boost margins and valuations,” Mishra said.

According to Mayank Mundhra, FRM- VP of risk and the head of research at Abans Financial Services, the Nifty Metal index rebounded as investors factored in higher global metal prices and the increased earnings potential for Indian firms.

Moreover, as steel and aluminium prices have surged due to tariffs, Mundhra said the market is capitalising on this trend and anticipating further price hikes if additional tariffs are imposed.

Devarsh Vakil, Head of Prime Research at HDFC Securities, believes the sector is experiencing a rising demand tailwind.

“Steel demand in India has grown robustly, consistently outperforming other major economies. While most major markets have experienced demand contraction, India has maintained impressive double-digit growth in recent years. This strong domestic outlook creates significant opportunities for Indian steel manufacturers, who are strategically expanding capacities and enhancing their value-added production portfolio,” said Vakil.

While the sector’s profitability has been challenged by declining steel prices since FY23, Vakil observes a reversal appears imminent as China’s real estate market shows signs of stabilisation. Moreover, the demand for steel in China could strengthen following recent government stimulus measures.

Besides, Vakil believes that the correction in coking coal prices should further support steel companies’ margins and profit recovery, complemented by Indian companies’ comprehensive cost-reduction initiatives.

Which metal stocks should you buy?

Mishra of Religare Broking said that from the short-term perspective, Tata Steel, Vedanta, and JSW Steel look promising.

Vakil maintains a positive outlook on Jindal Steel And Power, JSW Steel, and Tata Steel.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.