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Metal sector would outperform in the coming months, says Indiacharts.com’s Srivastava

A very good move in the leaders like National Aluminium Company, Hindalco Industries, Vedanta, is because the aluminium prices were hitting 52 week highs all of last month, said Rohit Srivastava, Founder and Strategist of Indiacharts.com.

The good news, though in the last few days is that the rally in commodity prices became a little more broad-based, he said.

“So you started to get copper to participate because copper was the strongest last year and then it actually went into a long consolidation mode for the last four to five months and was not really participating in the move. You also saw a pretty deep correction in the likes of say lead prices and in fact, the most important one, the outperforming sector of last year was steel. You actually saw a decline in steel and iron ore prices since the China issue came in that had sort of suppressed most of those. So the good news is we are starting to see that momentum again,” Srivastava added.

“So copper prices moved up, steel prices bumped up a bit, they are still not back where they were, but at least you got that bump up so you get a feeling that maybe they have bottomed out. You are seeing new highs in zinc, you are seeing new highs in nickel. So all of put together, and the last but not least in the watching is the dollar itself,” he said.

“So the dollar index having rolled over I think over the last three to four days gives me a sense that possibly the longer term dollar bear market has resumed. If that is true, then these commodity price increases that we are seeing right now might actually continue into the months ahead maybe into the year end,” he highlighted.

So, his sense is the metal sector continues to outperform not only the aluminium and copper names but possibly get participation from steel and the rest of the segments within the sector as well. It should become more of a broad-based move and might even continue to do so irrespective of what Nifty is doing. “So Nifty may go in its own path but if you have rising commodity prices and a falling dollar environment, then the metal sector would outperform in the coming months,” explains Srivastava.

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