Prices of commodities have surged considerably considering that last year. Metal rates are up 40-50% and the agri-index is 30% above January 2020 levels, according to domestic brokerage firm JM Financial. “Supply constraints coupled with an earlier-than-anticipated demand revival in the second half of 2020, along with the global fiscal and monetary boost has driven recent commodity price increases,” they mentioned in a current report. Although the pickup in rates may possibly outcome in a spike in inflation which could additional influence consumption, there are also specific possibilities for investors. Analysts at JM Financial think some metal stocks along with oil & gas sectors plays could be the beneficiaries of the upcycle.
Metals
Domestic HRC cost continues to rise and is up practically Rs 4.8per ton from March 2021 finish to Rs 60,000 at the moment driven by healthier demand from finish-user industries and a robust rally in international steel rates, the report mentioned. Demand for steel has been robust from China although it tries to battle pollution by capping domestic production. “We expect steel prices to hold firm in near term as long steel demand enters construction led seasonally strong period while high automotive demand holds,” JM Financial added.
In India, crude steel capacity addition of only 24 million tons more than FY22-25E is anticipated by JM Financial. Among stocks, the report mentioned that Tata Steel, Jindal Steel and Power, and JSW Steel stay their prime picks. Tata Steel at the moment trades at Rs 929 per share and the target cost for the exact same is at Rs 1,160 apiece. Jindal Steel and Power trades at Rs 443 per share, the report has pegged a target cost of Rs 500 on the scrip. JSW Steel was quoting Rs 639 apiece on Friday, although the target cost for the exact same is Rs 700 per share.
Oil & Gas
Crude oil rates have also surged back from close to-zero levels to now trade in the variety of $60-70 per barrel. With normalcy searching closer than just before across the world, apart from some pockets, rates continue to inch up. “ONGC and Oil India are the key beneficiaries of higher crude price; preferably ONGC given its higher leverage to crude price (partly due to its overseas oil portfolio),” the report mentioned. JM Financial mentioned that the two stocks could also advantage from the prospective deregulation of/hike in domestic gas cost.
ONGC was trading at Rs 102.8 per share on Friday. JM Financial has a target cost of Rs 130 on the stock. Meanwhile, Oil India has a target of Rs 145 per share, up from its present marketplace cost of Rs 116 apiece.
(The stock suggestions in this story are by the respective analysis and brokerage firms. TheSpuzz Online does not bear any duty for their investment suggestions. Please seek the advice of your investment advisor just before investing.)