Metal stocks in the limelight

By SiliconIndia   |   Wednesday, December 30, 2009   |    5 Comments
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Bangalore: The holiday shortened week proved to be happy trading week for almost all the sectors on BSE, but with having stellar growth in the demand, Metal index emerged as a top performing index last week with a gain of 6.83 percent. Also, Metal index is the top performing sector index of 2009 with posting a return of over 200 percent. The index was among the top losers in 2008, second only to BSE Realty. On BSE, Metal index was followed by Oil and Gas and Auto index, which recorded gains of 4.75 and 1.97 percent after losing 4.1 percent in the previous week. The Power index gained 4.6 percent, and was closely followed by Banking and PSU stocks which notched gains of 4.5 and 4.1 percent respectively. On the weaker side, the Healthcare index was the only loser ending 0.15 percent lower. As of December 29, 2009, total market capitalization of the Metal index was of Rs. 6,43,087.17 crore. The prices of non-ferrous metals rose by 70-130 percent from their lows about a year back. At current levels, there is less room for further appreciation. In fact prices of some of the non-ferrous metals might even decline. Analysts believe that investors have bought these metals in anticipation of a quick global economic recovery. However, in case of any set back in the form of a slower than expected recovery, the same could derail the rally. There has been a huge built up of metal inventory at the London Metal Exchange (LME), which is again a result of inflow of investor money as well as restocking of stocks (by actual users) at lower prices. As capacity utilization at metal producers is averaging around 70 percent, higher metal prices would attract new supplies and put pressure on prices. Additionally, since the current rally is also due to the weakening dollar, a rebound in the dollar as a result of further recovery in the U.S. economy, could pose additional concerns for metal prices.
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