Hindustan Zinc, Vedanta, Nalco and other metal stocks slide up to 5%. Here’s why

Hindustan Zinc led the losses, with its shares declining around 5%, while Vedanta and National Aluminium Company (NALCO) fell nearly 4% each. Hindalco dropped 3%, while Tata Steel, Adani Enterprises, Jindal Stainless Steel, JSW Steel, NMDC, Welspun Corp and other metal stocks declined up to 2%.

Why are metal stocks falling today?

The sharp fall in metal stocks comes amid a decline in metal prices, following US Federal Reserve Chair Kevin Warsh’s speech signalling that further interest rate hikes may be needed. On Friday, Warsh said the US central bank would “have work to do” if policymakers do not gain the confidence needed to ensure inflation is heading towards the 2% target.

Markets ⁠currently see a 57% chance of a rate hike at the Fed’s next policy meeting in September, against 36% before Warsh’s comments, according to the CME FedWatch tool.

Aluminium, copper and other metals declined as expectations of higher-for-longer US interest rates outweighed supply concerns that had earlier supported a monthly rise in August.

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The sharp drop in metal stocks may also have been driven by profit booking. Nifty Metal index sharply surged more than 6% in August so far, outperforming major sectoral indices, amid supply concerns.
Also read | Hindustan Zinc vs Hindalco: Why Jefferies raised target prices for both, but prefers one over the other

Jefferies on metal stocks

In its latest note, Jefferies noted that the recent divergence in metal prices has favourable earnings implications for Hindustan Zinc while weighing on Hindalco. Spot zinc prices have risen 15% over their Q1 averages, while silver has recovered 23% from July lows. The international brokerage remains constructive on precious metals, believing that the implications of widening fiscal deficits, elevated debt levels, and ongoing currency debasement remain underappreciated. It raised silver price assumptions to $60-63, still 8-14% below spot, suggesting further potential upside to earnings if spot prices persist.

In comparison, aluminium prices are 10% below their June-quarter average, Jefferies noted. While supply disruptions in the Middle East led to a 4% YoY decline in global production in the first half of 2026, a 2% increase in Chinese output largely offset the decline, keeping global production broadly stable.

Supply availability could improve in the coming months if the disrupted Middle East capacity gradually returns, with Emirates Global Aluminium (EGA) targeting normal production by the first quarter of 2027 and Aluminium Bahrain (ALBA) indicating repairs are largely complete, Jefferies noted, as it raised its FY27-28 aluminium price assumptions to $3,300-3,325, still 3-4% above spot.

Jefferies remains bullish on Hindustan Zinc shares, raising its target price because it believes zinc and silver are shining brighter than aluminium. The international brokerage hiked its target price for Hindustan Zinc shares to Rs 750 apiece, while maintaining its ‘Buy’ call on the stock.

Jefferies also raised its target price for Hindalco Industries to Rs 1,140 apiece, but has a ‘Hold’ call on the stock. The international brokerage prefers Hindustan Zinc shares over those of Hindalco Industries.

Also read |Metal stocks: Time to contradict analyst expectations? 5 metal stocks with upside potential from a low 2% to a high of 17%

(With inputs from agencies)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)