A steep slide in aluminium prices battered metal stocks on Thursday. Shares of Hindalco, National Aluminium Company Limited (NALCO), Vedanta Aluminium and Vedanta Limited, already under pressure since the start of the week, extended their heavy losses, and the rout was sharp enough for one brokerage to turn bearish on the whole sector and bluntly advise investors to 'sell all aluminium names'.
At 1:35 pm on the NSE, Vedanta Aluminium Metal was trading 4.13% lower at Rs 444 per share. Vedanta Limited had slipped 2.75% to Rs 274.95. Hindalco was down 1.6% at Rs 960.5, while NALCO had shed 3.2% to trade at Rs 337.5 per share.
What is dragging the metals down
Several forces are pressing on metal stocks at once, softer commodity prices, a sell-off in precious metals led by silver, a strengthening US dollar and a hawkish Fed stance. Together they pulled the metal pack lower.
Nitant Darekar, Research Analyst at Bonanza, prefers to call it an 'underperformance' rather than a 'crash'. "A sell-off in precious metals, especially silver, on a stronger US dollar and a hawkish Fed stance has triggered selling in the space, with Nifty Metal constituents falling up to 3% and NALCO, Vedanta and Hindustan Zinc leading the losers, even as the Nifty50 traded up 0.69% near 24,187 by late morning. This extends June's profit-taking: the index has shed over 4% this month after a 20%-plus CY26 rally," he said.
Darekar added that the recent decline is a healthy consolidation and not a structural breakdown.
The aluminium 'bull case' under question
Experts, however, are split on the non-ferrous segment. Many had earlier been bullish on aluminium prices and on the growth outlook for names like Hindalco and NALCO. But InCred Equities argued in its report that the entire 'aluminium bull-case scenario' rests on the wrong framework.
"Investors continue to analyse aluminium through the lens of primary metal, where supply looks tight because China is close to its 45 mtpa capacity cap and Rest of World (RoW) supply was disrupted by the Middle East conflict. However, aluminium is not a consumed commodity like crude oil or coal; it is an above-ground circular metal. Nearly 1.5bnt (bn tonne) of aluminium remains available above the ground, and almost 80% of all aluminium ever produced is still part of the usable metal pool," the InCred Equities report, released on Thursday, noted.
Downside risk of up to 41%
The brokerage flagged a 41% downside risk for pure aluminium stocks like NALCO and Hindalco. It also indicated that Vedanta Aluminium could face headwinds in the current market conditions, though it did not assign any formal rating or target price to the company.
It put a 'reduce' call on both aluminium stocks and pointed to a 30% to 40% downside risk. On NALCO, InCred wrote, "This looks expensive at a time when aluminium prices are likely to fall by nearly US$800/t. In this scenario, EBITDA would fall to around US$700m, implying current valuation at ~9x EV/EBITDA; REDUCE."
Citing Hindalco's expensive valuation against the same expected drop of nearly US$800/t in aluminium prices, InCred said, "EBITDA would fall to around US$3bn, implying current valuation at ~10x EV/EBITDA; REDUCE."
