Aluminium stocks slide: InCred sees up to 41% dip for Vedanta, NALCO, Hindalco

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Indian aluminium stocks remained under pressure as the sector extended its recent decline, tracking softer aluminium prices, a stronger US dollar and cautious market sentiment. Share prices of Vedanta Aluminium and Vedanta Limited Hindalco Industries, and National Aluminium Company Limited (NALCO), all traded lower. At the same time, brokerage InCred Equities issued a bearish outlook, advising investors to reduce exposure to aluminium-focused stocks and “sell all aluminium names.”

During Thursday’s trade, Vedanta Aluminium fell 4.13 per cent to INR 444 (USD 4.64) per share, Vedanta Limited slipped 2.75 per cent to INR 274.95 (USD 2.87), Hindalco declined 1.6 per cent to INR 960.5 (USD 10.03), and NALCO dropped 3.2 per cent to INR 337.5 (USD 3.52).

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InCred questions aluminium bull case

InCred Equities argued that the market is misreading aluminium fundamentals by focusing solely on primary supply constraints.

According to the brokerage, investors are assessing aluminium “through the lens of primary metal,” whereby China’s 45-million-tonne annual production capacity cap and, more recently, the “Rest of World (ROW) supply was disrupted by the Middle East conflict.”

However, the report highlighted that being available for reuse, “Aluminium is not a consumed commodity like crude oil or coal,” but an “above-ground circular metal.”

“Nearly 1.5 billion tonnes of aluminium remains available above the ground, and almost 80 per cent of all aluminium ever produced is still part of the usable metal pool,” InCred added.

Based on this outlook, InCred expects aluminium prices to decline by around USD 800 per tonne, warning that pure aluminium producers could face significant earnings pressure.

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Brokerage sees downside for aluminium producers

The brokerage maintained a ‘Reduce’ recommendation on both NALCO and Hindalco, estimating a 30-40 per cent downside, with downside risk potentially extending to 41 per cent under weaker aluminium pricing.

For NALCO, InCred stated that lower aluminium prices could reduce EBITDA to around USD 700 million, while Hindalco’s EBITDA could fall to approximately USD 3 billion, making current valuations appear expensive.

As regards Vedanta Aluminium, although no formal price has been assigned to it, the brokerage also expects the company to face headwinds if aluminium prices remain under pressure.

Analysts remain divided on sector outlook

Despite the recent correction, market experts believe the broader metal sector remains supported by long-term structural demand.

Bonanza’s Research Analyst Nitant Darekar described the recent weakness as sector “underperformance” rather than a “crash,” attributing it to a stronger US dollar, a hawkish US Federal Reserve and profit-taking after the Nifty Metal Index’s strong rally earlier this year.

Meanwhile, Nishchal Jain, Quant Researcher at Share.Market by PhonePe, noted despite correcting from its recent highs, the Nifty Metal Index is holding firm around the 12,300-12,400 support band, indicating that its broader long-term upward trend remains intact.

Thus, he stated, “While corporate margins may face brief pressure from elevated operational costs over the next quarter, India’s aggressive infrastructure spending and global green energy transitions ensure a highly resilient long-term demand floor.” 

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