Foreign investors pulled $961 million (approximately ₹9,201.14 crore) from India's metals and mining stocks in June, marking the biggest monthly outflow since August 2023's $1,266 million outflow. According to National Securities Depository Ltd data, this selling appears largely tactical rather than structural, with analysts warning that earnings downgrades may continue as cost pressures persist and commodity markets weaken. The June outflow reversed almost 79% of January's ₹11,526 crore inflow, as global investors retreated from cyclical commodities amid uncertainty over global growth, US trade policies, China's demand outlook and a stronger US dollar. As per Karthick Jonagadla from Quantace Research, the real risk is not an earnings collapse but that positive growth no longer produces upgrades, with FY27 Ebitda estimates already cut by 6% for Tata Steel, 5% for SAIL and 2% for JSW Steel.
Steel producers are expected to post weaker-than-expected Q1 margin recovery as higher coking coal, freight and operating costs offset gains from stronger domestic steel prices. According to Equirus Securities, the brokerage expects blended realisations for its steel coverage universe to improve 5.3% quarter-on-quarter, driven by domestic price hikes and annual contract price resets with automobile manufacturers. However, Ebitda per tonne will rise only 17.5% sequentially to ₹13,521 per tonne, significantly below market expectations of ₹2,500-3,000 per tonne increase. The projected improvement is attributed to higher coking coal costs, together with elevated freight and operating expenses, which are likely to offset a significant part of the pricing benefit. Steel prices were mixed during the quarter, with flat steel prices increasing 8.6% QoQ to ₹58,312 per tonne after sharp hikes in April, while long steel prices remained broadly flat as higher supply from secondary producers weighed on pricing.
The Nifty Metal index surged 2.5% to 12,822 in intraday trading on Friday, led by strong gains in National Aluminium Company (NALCO) and Hindustan Copper, which gained around 4% each at ₹506 and ₹363 respectively. According to Business Standard, the rally was attributed to a rebound in base metal prices, mainly aluminium in recent trading sessions. Aluminium prices rose over 5% from recent lows in July, providing significant relief to metal companies. As per Equirus Securities, base metal companies are expected to report a healthy quarter, supported by higher LME aluminium prices and stronger sulphuric acid prices. Metal stocks are witnessing a rebound gaining up to 6% in July after falling up to 20% in June due to profit-taking and US tariff-related concerns. The selling also comes after the Nifty Metal index gained more than 13% so far this year, shifting investor focus from the sector's rally to whether earnings can keep pace.
For aluminium companies under Axis Securities coverage, the brokerage anticipates moderation in QoQ Ebitda growth due to raw material inflation. However, on a year-on-year basis, both Hindalco and NALCO are expected to deliver strong YoY Ebitda growth led by a 46% surge in London Metal Exchange aluminium prices following Middle East supply disruptions in Q1 FY27. As per CNBC TV18, Axis Securities is working with a price assumption of around $3,000 per tonne for 2026-27 (FY27) on aluminium, with prices expected to moderate to $2,800-$2,900 per tonne by 2028-29 (FY29). The brokerage believes higher production costs will prevent aluminium prices from falling significantly even if additional supply enters the market. LME aluminium is up 45% YoY and 13% QoQ due to the shutdown of Middle East capacity, with Hindalco's domestic operations benefiting from higher LME prices while Novelis may improve due to the lower impact of the fire at the Oswego facility and better scrap spreads. However, Equirus Securities warns that a sharp correction in aluminium prices on the London Metal Exchange, coupled with faster West Asia capacity restarts and fresh Indonesian supply, could keep prices range-bound and raise the risk of FY27-28 earnings cuts.
According to Karthick Jonagadla from Quantace Research, the real entry signal is sustained margin resilience and stable guidance, and not simply a lower multiple. He recommends a four-part barbell strategy: 45-50% in integrated domestic steel, 25-30% in primary non-ferrous producers, 10-15% in gold and silver exposure, and around 10% in selective downstream names with demonstrable pricing power. Ferrous producers look relatively better supported by domestic pricing and spreads, while globally linked non-ferrous names remain more vulnerable to commodity-price reversals. Sanjeeb Hota from Standard Chartered Securities India noted that companies with captive raw material advantages, a higher value-added product mix, strong balance sheets and ongoing capacity expansion are better placed to sustain earnings. The market still expects the Q1FY27 metals universe to deliver 20% revenue growth, 26% Ebitda increase, and 22% net profit growth year-on-year, though analysts warn that downside risks to both volumes and profitability persist, with FY27E earnings downgrades likely over the next three quarters.
