Metal pack has been an underperformer: Gaurang Shah

In a chat with ET Now, Gaurang Shah, VP, Geojit BNP Paribas Financial Services shares his views on metal stocks.

ET Now: How do you see stocks from the metal space like Hindalco Ltd., Sesa Sterlite Ltd., and Jindal Steel and Power to pan out given negative news flow from China?

Gaurang Shah: It is a multi layer problem. First of all, you have the Chinese overhang, then you have the domestic legal issue and you add to it the consumption which is absolutely flat to negative on the domestic side.

You look at the input cost, again there are issues. You look at the prices of finished long or flat products, they are more or less steady, neither going up, nor down and in an environment wherein you expect the government to kick start the reforms in terms of infrastructure taking shape, then it is going to take a while because unless and until you have these bills getting approved in the parliament, I do not think ground level uptick.

You will see uptick on domestic side for the consumption theme to pick up. So, the entire pack in the metal side has been an underperformer. The only stock that we like possibly is Hindalco Ltd. but that too on corrections, not at current levels and you need to give it a longer term time horizon say about year-and-a-half, two for the actual recovery to be seen in the metal sector.

Whereas other sectors like IT, banking, auto, NBFCs, pharma and FMCG, you can get better returns from one year time horizon so it is the kind of patience that an investor would want to keep getting invested in metal pack.