What lies ahead for Indian metals and mining stocks?

Metal stocks: The NIFTY METAL index ended flat with a positive bias on Thursday, November 20, with 5 out of 10 constituents settling in the green and the remaining five in the red.

HSBC, in its latest research report on the Indian metals sector, notes that most Indian metals and mining equities trade at a large premium to global peers. This is the result of three factors, as listed below:

1. Strong, sustainable demand driven by urbanisation and infrastructure spending;

2. Large iron ore, coal, bauxite, and zinc reserves mean that Indian companies are among the lowest-cost producers globally; and

3. Supportive regulatory policies provide protection from low-cost imports, especially from China.

Pinakin Parekh, analyst, India Metals and Cement at HSBC Securities and Capital Markets (India), says, “We prefer aluminium, given China’s capacity cap and steady global demand. We also have a positive view on silver and expect prices to remain firm, given increasing investor demand.”

The analyst added, “India is the world’s fastest-growing steel market, but we see steel stocks as more cyclical, given the seasonality of demand and lower Chinese steel production.”

The research report further said that Indian metals and mining stocks have re-rated in line with the broader markets.

Balance sheets are relatively strong as companies have deleveraged, and the long-term outlook is bright as the metals intensity of GDP growth remains elevated, given increasing urbanisation and higher spending on infrastructure, housing construction and industrial expansion.

India is now the second largest steel-producing country in the world. A large reserve base (bauxite, iron ore, coal and zinc) is an added positive, it added.

Outlook for Hindalco, NALCO bright

HSBC opines that the outlook for aluminium stocks such as Hindalco and NALCO is bright.

HSBC said aluminium is its most preferred commodity, given China’s capacity cap and steady global demand.

“We also have a positive view on silver and expect prices to remain firm, given increasing investor demand. We see steel as a more cyclical opportunity, given the seasonality of demand and lower Chinese steel production. The safeguard duty of 12% in India provides domestic steel companies with earnings support. We see coal and iron ore as being relatively more challenged, given looser supply-demand balances.”

Hindalco

As regards Hindalco, the report added that the impact of a series of setbacks suffered by Novelis, its US subsidiary, will fade from FY27. Besides, its India business outlook remains strong, given its integrated aluminium operations.

The research report added that the large $10 billion capex between India and Novelis will scale up earnings sharply from FY28e onwards, even as the market is not pricing in any earnings increase.

NALCO

For NALCO, HSBC said its integrated aluminium operations (captive bauxite, aluminium, power plants and smelter) position it well in the current aluminium cycle. It added that NALCO’s increasing coal production should drive costs lower, and the ramp-up of the new alumina refinery should add to earnings from FY28e.

Tata Steel

The leading investment firm also expects Tata Steel to do well going forward.

In its report, HSBC said that Tata Steel’s India business remains very profitable (mine leases expire in 2030) and should benefit from any regional steel price hike. It noted that EBITDA losses in Europe have peaked, and Europe should generate positive EBITDA from FY26e onwards.

“We see Tata Steel more as a seasonal opportunity as steel prices overseas improve from December/January to May as construction demand picks up,” it added.

Hindustan Zinc (HZL)

HZL is among the lowest-cost zinc miners, and the LME zinc price outlook is stable. The company’s silver-rich mines position it to benefit from any silver price rally.

Coal India

HSBC believes that e-auction premiums should remain under pressure, given the rising auctioned coal block supply. Wage costs should rise from FY27e, as the current agreement covers the period from July 1, 2021, to June 30, 2026.

It added that Coal India’s attractive dividend payout (yield at c. 7%) should provide support to the stock price.

SAIL

HSBC notes that SAIL will remain a high-cost steel producer with likely wage cost increases from FY27e. SAIL’s new capex programme will likely drive debt higher, and earnings are likely to remain range-bound over FY26-28e, driven by marginal volume growth and flat EBITDA/t.

NMDC

HSBC said it expects global iron ore prices to remain under pressure as Chinese steel production continues to inch lower.

“With rising domestic iron ore production, we see domestic iron ore prices as range-bound with a downward bias,” it added. NMDC’s capex will increase as the company aims for higher capacity, it notes.

How Hindalco, NALCO, and Tata Steel fared in Q2 FY26

Hindalco Q2

Aditya Birla Group’s metals arm, Hindalco Industries Ltd, reported a 21.2% rise in consolidated profit after tax (PAT) at ₹4,741 crore in the quarter ended September 2025 (Q2 FY26), on the back of strong performance by the India business, disciplined cost management and operational efficiencies across segments.

The company had posted a consolidated profit after tax of ₹3,909 crore in the year-ago period, Hindalco Industries Ltd said in a filing to BSE.

Revenue from operations during the July-September period rose by 13% to ₹66,058 crore as compared to ₹58,203 crore recorded in the year-ago period.

“The robust results were driven by a strong performance by the India business and a resilient performance by Novelis,” the company said in a statement.

India’s aluminium upstream business delivered another standout performance with EBITDA (earnings before interest, taxes, depreciation and amortisation) at ₹4,524 crore, up 22%, while aluminium downstream achieved an EBITDA of ₹261 crore, up 69% compared to Q2 FY25.

NALCO Q2

State-owned National Aluminium Company Ltd (NALCO) reported a 36.7% rise in consolidated profit to ₹1,429.94 crore in the quarter ended September 30, 2025 (Q2 FY26).

The company had posted a consolidated profit of ₹1,045.97 crore in the year-ago period.

The consolidated revenue from operations during the July-September period rose to ₹4,292.34 crore against ₹4,001.48 crore seen in the year-ago period.

NALCO has lined up an investment of ₹30,000 crore to set up a new aluminium smelter and a coal-based power plant over the next five years. Of this, ₹18,000 crore has been earmarked for the smelter, and ₹12,000 crore will be spent on the thermal power plant.

Nalco also plans to be a Maharatna firm in another five years.

Tata Steel Q2

Tata Steel reported an over fourfold jump in consolidated net profit to ₹3,183.09 crore in the September quarter, mainly supported by revenues from the India business.

It had clocked a net profit of ₹758.84 crore in the July-September period of FY25, the company said in an exchange filing.

Tata Steel increased its total income to ₹59,052.84 crore against ₹54,503.30 crore in the second quarter a year ago, posting a rise of over 8% year-on-year.

The company earned a revenue of around ₹38,592 crore from India operations, which includes Neelachal Ispat and Nigam Ltd (NINL).

In a statement, Tata Steel CEO & MD T V Narendran said, “The global operating environment remained challenging with a persistent overhang of tariffs, geopolitical tensions and elevated steel exports. Despite this, Tata Steel delivered a resilient performance, with the EBITDA margin improving for the second consecutive quarter.”

Disclaimer: This article is purely for informational purposes and should not be considered investment advice from Upstox. Please consult with a financial advisor before making any investment decisions.