Metal Stocks In Focus Ahead Of Q1 Results as Kotak Securities Positive On June-Quarter Outlook

Metal stocks are back in focus as the June-quarter earnings season gets underway, with improving steel prices and stronger aluminium and zinc realisations raising expectations of a better quarter for producers. The latest sector assessment from KSL Research points to healthier operating performance across both steel and non-ferrous companies, even as elevated coking coal and iron ore costs continue to weigh on profitability.

The Nifty Metal index traded at 12,583, down 1% during Tuesday's session. Despite the day's decline, the index has gained 1% over the past six months, broadly in line with the benchmark Nifty 50, reflecting a market that has balanced firm domestic demand with swings in global commodity prices.

For steelmakers, the June quarter marks a reversal from the pricing pressure seen in earlier quarters. Domestic steel prices strengthened steadily through the period, pushing average realisations higher by nearly ₹4,000 per tonne, according to KSL. While input costs also moved up on the back of higher coking coal and iron ore prices, the improvement in selling prices is seen limiting the impact on margins. Volume growth across the brokerage's coverage universe is estimated at around 8% year-on-year, helped by fresh capacity coming on stream at leading producers.

The picture is equally encouraging in the non-ferrous space. Aluminium prices averaged about 11.5% higher than the previous quarter, while zinc prices rose 7%, improving the earnings environment for producers. Alumina prices remained largely unchanged during the quarter, although silver prices softened.

Company-level performance is also expected to reflect the improvement in commodity prices. Hindalco Industries' India business is estimated to deliver EBITDA of around ₹6,750 crore, while Novelis is likely to benefit from stronger packaging demand, the restart of its Oswego facility and continued measures to offset tariff-related costs. At NALCO, aluminium EBITDA is estimated at ₹2,180 crore, though weaker alumina profitability could temper overall earnings. Hindustan Zinc is seen reporting broadly stable sequential EBITDA despite the impact of hedged quantities, whereas Vedanta could post a 2.7% sequential rise in EBITDA on the back of stronger zinc prices and improved volumes. Separately, Vedanta Aluminium reported a 5% year-on-year increase in aluminium production to 632 kilotonnes during the June quarter.

The earnings season is now expected to offer a clearer picture of how much of the recovery in metal prices has translated into margins. Investors are also likely to watch management commentary on demand trends, raw material costs, pricing discipline and capacity utilisation, which could shape sentiment for the sector in the coming quarters.

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