The Third Eye : Metal losing Sheen

The third eye senses the glow dampening out of the Metal Sector. The metal Sector has been in limelight for last six months or so with the prices rising to all time high.

Does it mean that that the metal sector has peaked out?
Since their respective peaks, metals like Aluminium and Zinc have fallen by more than 13%, Copper down by 8% . Nickel appears to be an exception?
One obvious reason is slowdown in Chinese economy, which is already facing a problem of overproduction.
Aluminium was trading at $1742 per tonne with 27 months futures trading at $1672 on the London metal Exchange on June 2.
Clearly, there is a sign of slowdown in prices of Metals and this is going to affect the bottomlines of the companies in this sector for the coming year.
The FII data shows that they were sellers in Metal stocks and moving to other growth stocks.

So, what does this means to the Investors?
Investment Guru is of view that Investors should avoid buying in the metal stocks at this stage as the metal stocks are bound to go southwards.
A wait and watch approach is recommended for at least a three month time period to assess the impact of slowdown on the share prices.

Which company will perform better?
Investment Guru believes that in the steel space, Investors should watch out for stocks like JVSL which was in news for approval to acquire Euro Coke and Energy Pvt. Ltd., Euro Ikon Iron and Steel Pvt. Ltd. and JSW Power Ltd. through a merger with the company.

This acquisition will bring in positive synergy for the company and will help it outperform other stocks in the steel space. The profit before Tax of the company will go up by Rs. 145 Crores due to this merger.

The combined entity will be available to the Investors at cheaper valuations as compared to other steel stocks.

But wait for the slowdown euphoria to die down so that you can enter the stock at attractive price.

Happy Investing!