Nifty Metal has declined by 8.53% over the past month due to a mix of heightened global risk aversion linked to the West Asia conflict, tariff news, volatility in base metal prices, increased trading margins, and substantial profit-taking in stocks that excelled throughout 2025.
The brokerage firm, Axis Securities, continues to have a positive outlook on the metals sector as a whole and suggests a “Buy on Dips” approach, since the factors driving demand, coupled with supply limitations, support non-ferrous metals, while the safeguard duty and strong domestic steel demand benefit Indian steel producers.
Although the valuations are not inexpensive as stocks have not significantly corrected during the broader market downturn, lower price levels could offer a buying opportunity.
The brokerage firm observed that escalating geopolitical tensions in the Middle East have resulted in a rise of 14% in HRC prices and 7% in rebar prices thus far this quarter, whereas coking coal and iron ore prices have only increased by approximately 2% during the same timeframe, leading to wider spot spreads.
In the first quarter of FY26, average prices for steel HRC have risen by 11% year-over-year, which is expected to lead to increased spreads for steel mills based on consumption in Q4FY26 (with coking coal prices rising approximately 7% in Q3FY26, to be utilized in Q4 with a one-quarter lag).
The conflict in West Asia is likely to have a greater effect on DRI-based steel manufacturers, as well as on downstream and galvanized production processes, due to their reliance on the LNG, Propane, and LPG supplies affected by the war, according to Axis Securities.
Although steel production via the BF method may experience limited effects, the comments from management following Q4FY26 results regarding input costs, exports, and production forecasts will play a crucial role in determining stock performance in the short to medium term, according to the brokerage.
Strait of Hormuz impact on Metal Sector
Disruptions in the Strait of Hormuz are expected to have a substantial effect on the inflow of LNG, propane, and LPG, presenting challenges for India’s steel industry, especially for gas-reliant manufacturers. Firms dependent on gas-based Direct Reduced Iron (DRI) and specific downstream processes could experience reductions in capacity owing to supply limitations.
The brokerage firm suggests that JSW Steel may encounter operational challenges at certain facilities, particularly within its coated products division, while AMNS India is at greater risk due to approximately 65% of its 9 mtpa capacity being reliant on gas-based DRI and electric arc furnace technology.
Jindal Stainless is currently functioning at a diminished capacity and has indicated possible delays in shipments. Smaller secondary steel companies and SMEs are expected to be the most adversely affected, as they lack pricing power and alternative supply options.
Integrated players like Tata Steel and Steel Authority of India Limited are expected to see limited impact on upstream production, though certain downstream processes may face pressure. Tata Steel’s European operations could be affected by rising gas prices, but supportive policy changes in the UK—such as reduced import quotas and higher tariffs—may aid margins in the coming quarters, as per the brokerage.
In the aluminium space, Hindalco Industries and National Aluminium Company may face some input cost pressures due to higher thermal coal prices, although firm aluminium prices are providing a cushion. Meanwhile, APL Apollo Tubes could see a limited production impact of around 3–4%, primarily due to disruptions at its Dubai facility and galvanising operations in India.
Stocks to buy, sell or hold?
According to Axis Securities Research, select metal and mining stocks continue to see a mix of bullish and neutral outlooks. Tata Steel and Coal India Limited have been assigned a “Buy” rating with target prices of ₹220 and ₹500, respectively, indicating potential upside from current levels.
APL Apollo Tubes also carries a “Buy” call with a target of ₹2,250. Meanwhile, Steel Authority of India Limited (SAIL), Hindalco Industries, and National Aluminium Company (NALCO) are rated “Hold,” with target prices of ₹160, ₹1,050, and ₹390, respectively, reflecting a more cautious stance amid current market conditions.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
