After six years of nonperformance, metal stocks bounced back in 2016 with a gain of 47% against the Sensex return of 1.5%. The stocks of Vedanta, Hindalco Industries and Hindustan Zinc more than doubled this year. On the other hand, companies from different sectors such as information technology (IT), pharma and telecom sectors fared poorly. Companies like Justdial, Wockhardt, Reliance Communications were among the worst-performing stocks of 2016, with stocks down by up to 69%.
Analysts from Edelweiss Securities stated in a report dated December 2, “Non-ferrous companies are expected to expand their margins led by stable prices (driven by global supply constraints).”
At the end of calendar year 2016, non-ferrous companies like Vedanta, Hindalco Industries and Hindustan Zinc shot up by as high as 171%.
Vedanta’s stock price shot up from R90.30 on the last day of December 2015 to R2,46.2 on Monday. Gujarat-based fertiliser company Gujarat Narmada Valley Fertilisers (GNFC) went up to R208.75 from R80.85 on December 31, 2015, up by a staggering 158%.
The report expected Hindustan Zinc and Vedanta to be key beneficiaries of this rally in LME zinc prices. “Hindustan Zinc will also avail additional benefit of operating leverage as its production ramp up is expected to come at elevated price levels. Vedanta, besides gaining from Hindustan Zinc’s production ramp-up ,will also benefit from better margins in its international zinc business,” stated the report.
LME Zinc prices increased by 69% in CY2016, and are currently trading at a nine-year high.
While on the other side, pharma mid-cap Wockhardt fell from R1,531 on December 31, 2015 to R687 on Monday. Likewise Wockhardt and e-commerce portal Just Dial fell by 55% from R842-379 during the same period.
In CY2016, BSE Healthcare slipped by 8.5%. The reason was largely the tighter regulations by US Food and Drug Administration (US FDA).
The BSE Telecom Index also fell sharply by 17.5% in CY16. Edelweiss Securities also said it expected voice and data realisations to remain under pressure as telcos increase discounts to counter subscriber churn to Reliance JIO.