Metal shares extends gain on strong China data

The BSE metal index has rallied over 5% in past three trading sessions as compared to 1.5% rise in benchmark index.

Shares of metal companies are continue at their upward march trading higher by up to 3% after encouraging data from China and on hopes of higher net profit growth on sequential basis.

Hindalco Industries, Tata Steel, Jindal Steel and Power, Steel Authority of India (SAIL), JSW Steel and Sesa Sterlite are up 1-3% on the Bombay Stock Exchange (BSE).

The BSE metal index was up nearly 1% today, has rallied over 5% in past three trading sessions as compared to 1.5% rise in benchmark index since September 1.

China’s non-manufacturing Purchasing Managers Index increased in September to 55.4 from 53.9 in August indicating signs of growth revival in the world's second largest economy. The index has recorded its highest reading since March.

A reading above 50 indicates activity in the sector is accelerating, while one below 50 indicates it is slowing. China is the world's largest consumer of copper and aluminium.

Meanwhile, analyst expect base metal companies to report stronger profit sequentially in September quarter due to weaker Indian rupee (INR).

On a year-on-year basis, we expect sales (excluding JSW, Sesa Sterlite) to grow 3% YoY, EBIDTA to grow 39% and profit to grow 42%, says analyst at Bank of America Merrill Lynch in results preview.

Movement in base metal price was mixed with zinc prices up 1% QoQ, lead prices up 2.4% QoQ while copper (-1% QoQ) and aluminum prices (-3% QoQ) were sequentially lower. However weaker INR (-9% QoQ) should boost domestic realizations and lead to higher profit on a QoQ basis, added analyst.

In steels, we expect sequential improvement in profit across most steel names (excluding Tata) due to better volume and slightly better realizations due to partial benefit of price hike in September, said analyst.

Among the individual stocks, Tata Steel was the largest gainer, up 4% at Rs 299 on the BSE. The stock has rallied nearly 10% in past three trading days.

Hindalco Industries was up 3% at Rs 122, followed by SAIL and Jindal Steel are up 2% each at Rs 56 and Rs 240 respectively on the BSE.