By Brijesh Bhatia,
The Indian stock market has witnessed a volatile six months, with the benchmark indices fluctuating in a way that has caused unease among traders. D-Street has felt the tremors of fear, uncertainty, and caution as market participants struggle to trade through the choppy waters. As global and domestic factors influence the market’s direction, it’s easy to get caught up in the herd mentality, where fear overshadows logic and decision-making.
However, as Warren Buffett wisely puts it, “Be fearful when others are greedy and greedy when others are fearful.” This timeless quote emphasises the importance of acting when others are scared.
The key, however, lies in knowing where to look and how to analyse market conditions to identify opportunities that others may be overlooking. In times of fear, if you focus on the right sectors, the market may reward you with substantial gains.
One sector that is offering an attractive opportunity amid this fear is the metals sector. While fear dominates sentiment, the metal industry is signalling the potential for strong growth, as seasonality trends in copper prices suggest favourable conditions for metal stocks.
Why focus on metal stocks?
The appeal of metal stocks, particularly in the current environment, lies in the seasonality analysis of MCX Copper prices. Over the last decade, February has consistently shown positive returns for copper, with an average gain of 3.25%.
YearJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberYearly Return2015-14.09%8.44%1.79%6.91%-4.44%-4.63%-9.04%1.89%0.28%-1.79%-10.52%4.77%-20.95%2016-1.24%3.34%-0.23%4.03%-6.49%4.69%0.78%-7.31%7.51%-0.76%21.47%-4.86%19.43%20177.78%-2.03%-4.30%-3.45%0.31%4.46%6.61%5.82%-1.52%3.91%-2.99%8.02%23.67%2018-3.24%-1.09%-2.06%2.88%1.70%-2.38%-3.59%-1.84%7.27%-3.81%-2.10%-4.41%-12.50%20197.32%6.19%-2.94%-1.34%-8.55%1.01%7.55%-0.25%-0.33%1.93%-0.04%-1.33%8.38%2020-1.97%-1.59%-28.30%32.41%0.91%12.78%10.27%2.86%-0.99%2.41%9.92%3.75%36.72%2021-0.07%18.63%-5.12%12.87%0.07%-6.09%5.51%-4.81%-1.31%6.38%-2.47%1.54%24.58%2022-0.25%3.49%5.71%-3.60%-1.35%-9.78%-8.31%0.51%-0.99%2.64%2.90%6.43%-3.97%20238.32%-3.15%2.68%-4.73%-3.92%0.39%3.66%-0.90%-3.59%-0.82%1.52%2.01%0.69%20240.43%0.29%3.34%13.94%1.26%-2.18%-7.06%1.32%5.36%-3.96%1.15%-3.42%9.34%Avg. Performance0.30%3.25%-2.94%5.99%-2.05%-0.17%0.64%-0.27%1.17%0.61%1.88%1.25% Source: RZone, Definedge Securities
The Nifty Metal Index: A Bullish Setup?
The Nifty Metals index is showing signs of a bullish reversal.
Source: TradePoint, Definedge Securities
A Piercing Candlestick pattern on its weekly chart suggests a possible change in trend, particularly as the index has approached key support levels like the 62-week exponential moving average (62WEMA) Channel. This pattern often signals the possibility of a sharp reversal to the upside, and those who act early may reap the rewards.
While there is always a risk that the index has broken previous support levels, the bullish reversal pattern indicates that a recovery could be in the cards. With this setup in mind, let’s jump on to three individual metal stocks that could benefit from this potential market move.
1. National Aluminium (NALCO)
National Aluminium Company (NALCO) is a public sector undertaking and one of India’s largest producers of aluminium.
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