Nifty Metal surged 15.6% on a YTD basis in 2024; Top 3 metal stocks driving the rally with highest returns

In 2024, the Nifty Metal Index has risen 15.6% on a year-to-date basis (YTD), slightly underperforming the benchmark NIFTY50’s 18.2% gain. Further, the metal index posted 7% decline over the past three months. However, investors' sentiment remains optimistic, with expectations of domestic price premium, steady leverage, and easing input costs that drive future growth.

Vedanta, Hindustan Zinc and Jindal Steel & Power have emerged as top performers within the metal sector, showcasing resilience amidst market fluctuations.

Top 3 Nifty Metal stocks with the highest YTD in 2024

Source: NSE

Vedanta Ltd (YTD return 77.68%)

In Q1FY25, Vedanta’s profit surged 45% YoY to ₹5,926 crore, and revenue jumped 6.02% YoY to ₹35,764 crore, driven by improved margins and cost reductions.

The stock’s 77.68% YTD rally is attributed to strong financial performance and an attractive dividend yield of 7.78% with three interim dividends amounting to ₹35 per share in 2024, so far.

Going ahead Vedanta plans to demerger into six independent companies by year-end is expected to unlock shareholders' value.

Additionally, Vedanta raised ₹3,200 crore from its Hindustan Zinc offer for sale (OFS). The company plans to utilise those proceeds generated from the OFS for debt reduction and investment in its growth projects along with ₹8,500 crore qualified institutional placement.

In the aluminium segment, Vedanta aims to increase value-added capacity from 1.5 mtpa to 2.6 mtpa, improving product premium and lowering production costs.

Hindustan Zinc Ltd (YTD return 56.97%)

In Q1FY25, Hindustan Zinc achieved its highest-ever first-quarter mined and refined metal production, aided by favourable metal prices. Vedanta-owned company reported net profit of 19.4% YoY to ₹2,345 crore, while revenue increased by 11.6% YoY to ₹8,130 crore, driven by higher metal volume and stronger metal and silver prices, and a robust dollar.

Looking ahead, Hindustan Zinc plans to invest ₹20,900 crore ($2.5 billion) to double its annual production capacity to 2 million tonnes of zinc, lead, and silver.

The expansion will include brownfield projects at existing mines and a new greenfield smelter with a capacity of up to 0.6 million tonnes. Further, the company is also exploring zinc-based or zinc-nickel batteries as an alternative to lithium batteries, which are gaining attention amid the global energy transition.

Jindal Steel & Power Ltd (YTD return 36.26%)

In Q1FY25, Jindal Steel and Power reported a 21% decline in profit to ₹1,338 crore, driven by higher expenses and weak steel demand, partly due to the general elections. Raw material costs surged 22%, leading to an 8% rise in expenses at ₹11,793 crore. Additionally, higher costs of rebar, a key raw material for steelmakers, continued to pressure margin.

However, the metal sector has a positive outlook, supported by resilient domestic fundamentals and easing input costs as key sector drivers.

The metal sector’s growth outlook appears promising, not just due to strong domestic fundamentals, but also after the U.S. Fed’s rate cut. Additionally, investor optimism was renewed due to potential Chinese housing policy changes, which have boosted metal prices and supported the sector’s recovery.