Metal stocks top underperformers in 2013

Shares of Indian metal companies are going through a rough patch in 2013, as a slowing economy at home coupled with rising input costs and weakness in Europe hurts demand.

Indian shares have had a mixed year so far, but the BSE metals index, which is a barometer of metal companies' performance in India, has been the worst performer among sectors, data shows.

The 13-share metals index is down more than 33 per cent this year, widely underperforming the benchmark BSE Sensex that has lost nearly three per cent.

"Recovery is quite uncertain. China has slowed down. Once the demand slows down the pick-up in demand will take a lot of time," said Sanjay Jain, senior vice-president at Motilal Oswal Securities.

Signs of slowing growth in China, which is the world's top consumer of metals such as copper and steel, have dampened prospects, while weakness across Europe continues to weigh on the sector.

Metal stocks also suffered because of global overcapacity, rising input costs and delays in obtaining procedural clearances for mines, analysts say.

Ernst & Young said in a report that growth in global steel demand is unlikely to improve significantly in 2013 and sluggish demand combined with factors such as excess steelmaking capacity will challenge the sustainability of high-cost producers.