Metals stocks may shine in H2FY26 on favourable tailwinds

There has been a rally in metals stocks, with JSW Steel hitting all-time-highs and Tata Steel at a 15-month high on ‘Thursday.

- DEVANGSHU DATTA

Though the Nifty Metals Index was down 1 per cent on Friday, the rally in the sector has translated into gains of about 20 per cent in the last six months.

The gains have been driven by a rise in global metal prices, driven by both supply disruptions and improving demand. Expectations of US rate cuts anda weaker dollar lend further support, while the European Union's (EU's) proposal to restrict steel imports is seen as favourable for Tata Steel. Cuts in goods and services tax (GST) rates might also be supportive, as demand from the domestic automobile segment is expected to rise.

Price trends diverged for ferrous and nonferrous players during the July-September quarter of 2025-26 (Q2FY26).

Seasonally weak steel prices may have led to margin declines of over ₹2,500 per tonne for steel companies, but the drop in prices will be partly offset by lower coal costs. Guidance suggests a reduction of $5-10 per tonne in coking-coal costs for most companies. Steel volumes have grown due to domestic demand. India’s crude steel production in the first half (H1) of FY26 increased 12.4 per cent to 82.3 million tonnes and surpassed the 121 million-tonne mark in January-Sep-tember 2025.