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Vedanta To Hindalco: Indian Metal Stocks Rally On China Demand Optimism

April and May typically witness increased building activities in China, contributing to a surge in demand for steel.

<div class="paragraphs"><p>(Source: iStock gallery)</p></div>
(Source: iStock gallery)

Shares of iron ore companies rose on Tuesday as prices of the mineral rebounded from a 10-month low, reflecting the renewed investor confidence in the market's resilience. The prices had witnessed a 9% slump in the past two weeks, but investors are now betting on a swift recovery in demand, viewing the recent selloff as overdone. Futures in Singapore have climbed 2.7% to $107.10 a tonne, building on a 6% rally in the previous day.

April and May typically witness increased building activities in China, contributing to a surge in demand for steel. Iron ore inventories at Chinese ports are displaying signs of stabilisation, with volumes declining last week from peak levels observed since February 2023.

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Street View

Citi Research anticipates volumes to improve quarter-on-quarter, while year-on-year trends may be more muted with growth ranging from minus 6% to 6%. Tata Steel India Ltd. will be at the upper end of the spectrum, it said.

Axis Securities Ltd. also expects a good quarter for base metal stocks, while Hindalco Industries Ltd. and National Aluminium Co. are likely to see margin growth YoY/QoQ. Its top picks among ferrous stocks are Hindalco, Nalco and Tata Steel.

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Implication For Indian Metal Stocks

Shares of Indian metal companies were trading in green on Tuesday, with Vedanta Ltd.'s stock jumping as much as 3.8% during the day. Steel Authority of India Ltd.'s stock was up 3.4%, while both Nalco and Hindalco stocks were up 2.5% each.

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