The market seems to be at crossroads, with macro-economic indicators — that were supporting the rally — going through a pincer. Brent crude’s futures has inched up by 10% year till date (YTD), amid political instability in the world’s top oil exporter — Saudi Arabia. On the other hand, US Fed is set to embark on a rate hike, beginning December. Higher interest rates in the US, means a stronger dollar and weaker rupee, which could lead to raw materials getting dearer for Indian companies.
Not surprising that non-ferrous metal stocks within the Nifty metals pack have clocked an average return of 43% YTD, comfortably outperforming the benchmark Sensex, which has posted return of 25% during the same period. In CY17, aluminium and zinc prices on the LME have increased by around 25% each owing to restricted smelter capacity in aluminium and production constraints in zinc mines.
Metal analysts attribute non-ferrous metals’ rally to the demand-supply mismatch that has emerged after closure of certain capacities across the globe. “There has been a deficit situation in zinc and aluminum as quite a few zinc mines have shut down. In the case of