Despite a massive rise in commodity prices in 2022, this has been a strong year for metal stocks. The Nifty Metal index has given positive returns for the third straight year in 2022, rising nearly 22 percent in this calendar year. In comparison, the benchmark Nifty has added over 5 percent in 2022.
While 2022 has been positive for the metal pack, the index performed exceptionally in 2021, when it was the best-performing sector, soaring nearly 70 percent. Meanwhile, in 2020, the sector rose around 16 percent. However, in 2019 and 2018, the index gave negative returns.
Nifty Metal is up 139 percent from December 2019 and 22 percent in 2022 significantly outperforming Nifty which is up 52 percent and 7 percent, respectively.
In the current calendar year, the sector was majorly led by Adani Enterprises, which surged over 140 percent, becoming a multibagger stock. This comes on the back of its exceptional earnings performance. In Q2, the company's net profit surged 117 percent year-on-year (YoY) to ₹461 crore from ₹202 crore in the corresponding quarter last year. Its consolidated total income for the quarter surged 183 percent YoY to ₹38,441 crore compared with ₹13,597 crore in the same quarter last year. The top-line growth was led by a strong show at IRM and Airport business, the company said.
Group Chairman Gautam Adani said: "Adani Enterprises has yet again validated its standing as India’s most successful new business incubator as it continues to build on exciting ideas strategically aligned with the diverse strengths of the Adani portfolio of companies.”
"We continue to believe ever firmly in the India growth story and remain committed to our core philosophy of nation-building through the development of advanced, efficient and world-class infrastructure that delivers increasing shareholder value,” he added.
Meanwhile, Coal India was the second-best-performing stock in the metal pack, up 54 percent in 2022. The firm also more than doubled its profit in Q2, up 106 percent to ₹6,044 crore. Coal India said its consolidated revenue jumped 28.1 percent YoY to ₹29,838 crore during the quarter.
Further, Ratnamani Metals and JSPL jumped over 40 percent each in 2022; NMDC and Welspun Corp advanced over 20 percent each, and APL Apollo tubes and JSW Steel were up around 14 percent each.
However, SAIL was the worst-performing stock in the metal space, down 23 percent followed by NALCO, down 22 percent. Hind Copper and Vedanta also shed around 10 percent each in 2022.
Overall 2022 was a tough year with rising commodity prices which impacted their earnings. Further, major steel firms also witnessed earnings downgrade in the first half of the year.
| Best performing Metal stocks | % gain |
| Adani Ent | 140% |
| Coal India | 54% |
| Ratnamani Metals | 51% |
| JSPL | 46% |
| NMDC | 28% |
| Worst Performing Metal stocks | %loss |
| SAIL | -23% |
| NALCO | -22% |
| Hind Copper | -11% |
| Vedanta | -10% |
| Hindalco | -4% |
2023 Outlook
Going ahead, analysts expect the volatility to continue in the metal space and see selective stocks performing better than the rest.
“Demand is expected to improve in the medium term with likely easing of covid policy and improvement in the real estate sector, backed by recent stimulus announced,” brokerage house JM Financial said in a report.
Tata Steel is its top pick in the ferrous pack given its sector-leading spreads in the domestic market. In non-ferrous stocks, it likes Hindalco Industries as the company will see a structural pick up in earnings due to arm Novelis.
Meanwhile, brokerage house ICICI Securities remains cautious on the ferrous pack and prefers JSPL and Shyam Metalics given their strong long products portfolio. The brokerage is also bullish on APL Apollo Tubes as, being a downstream player, it is relatively insulated from adverse price movements.
Global brokerage Nomura is also underweight on the space. Global slowdown and/or higher energy prices can present significant downside risks to earnings. The valuation has moved higher in 2022 making risk-reward unfavorable, it noted.