India’s metals sector is riding a wave of optimism after a strong second-quarter performance in FY26, with brokerages projecting robust growth through the remainder of the year even as corporate capex slows.
The Nifty Metal index has surged nearly 20 per cent year-to-date, the second best behind Nifty Auto among sectoral indices, reflecting investor confidence in the sector’s resilience despite broader demand headwinds. Firm price in underlying metals, value buying at low levels and demand pick-up boosted the sentiment for metal stocks, especially that of non-ferrous, said analysts.
Earnings outperformance
According to Nuvama Institutional Equities, metals & mining delivered 9 per cent year-on-year revenue growth, with EBITDA and PAT rising 15 per cent and 18 per cent, respectively — beating consensus on all three metrics. Non-ferrous producers were standouts with nearly 10 per cent quarter-on-quarter EBITDA growth, underpinned by firmer aluminium and zinc prices. Vedanta featured among the top picks after hitting an all-time high in early December.
Motilal Oswal’s interim review of Q2-FY26 corroborates the beat: within its coverage, metals earnings rose nearly 7 per cent year-on-year even though ferrous companies saw sequential NSR declines due to a heavy monsoon. MOFSL also highlights healthy volume growth across ferrous players (ex-Jindal Steel), with EBITDA per tonne at ₹9,960/₹11,129/₹5,149 for JSW Steel/Jindal Steel/SAIL — ₹1,000–2,000 per tonne higher than its estimates.
Non-ferrous vs ferrous caution
Emkay Global’s sector analysis signals an upside skew for non-ferrous earnings at prevailing spot prices — particularly for Vedanta and Nalco — given aluminium trading approximately 3 per cent above FY27 forecasts, zinc holding firm, and silver providing support. In contrast, steel faces a transient soft patch: spot HRC is 12 per cent below FY27 assumptions, implying downside if prices stay lower for longer. Even so, the market is already pricing in a ₹3,000-per-tonne spread improvement for steel equities on expectations of a price-hike cycle. Emkay sees safeguards and the absorption of excess supply as potential catalysts for a durable recovery.
MOFSL’s company-level read-through adds nuance: Vedanta’s outperformance was driven by aluminium, while Hindustan Zinc was broadly in line on favourable pricing but muted volume. Coal India and NMDC posted subdued earnings on seasonal volume weakness. Management commentary across ferrous names points to pricing recovery and demand tailwinds in H2FY26, tempered by rising coking coal costs.
Capex moderation
While profitability remains strong, Nuvama warns that corporate capex growth has slowed to just 4 per cent year-on-year in H1FY26 after a 20 per cent CAGR in FY21–24, with commodities (metals + energy) capex down nearly 7 per cent amid weak top-line momentum and margin stabilisation. It argues that a demand revival is essential before private capex can re-accelerate.
Emkay’s valuation framework finds non-ferrous equities relatively more attractive at spot prices, while ferrous names — though optically rich at spot — reflect trough-cycle multiples if steel prices recover as baked into estimates.
Bottom line
Brokerages remain constructive on non-ferrous (aluminium, zinc) given price support and cost efficiencies, and selectively optimistic on ferrous as the market prices in a steel-spread recovery in H2FY26. Yet the capex slowdown, seasonal production constraints, and global trade frictions could inject volatility — making commodity price trajectories and policy measures (such as safeguard duties) the key swing factors to watch
Top Picks (consensus tilt): Vedanta, Hindalco, Nalco
Steel watchlist: JSW Steel, Tata Steel, SAIL — monitor HRC price normalisation and coking coal trends.