NALCO stock may appreciate by 30%

NALCO stock may appreciate by 30%

By Rajiv Kapoor | 13 August, 2017

National Aluminium Company Limited (NALCO) is a Navratna PSU and the country’s leading manufacturer and exporter of alumina and aluminium. Chemicals produced by the company include calcined alumina, alumina hydrate, while aluminium includes aluminium ingots, wire rods, billets, strips, rolled and other related products. Bauxite produced for captive consumption for production of alumina is included under the “chemicals” segment and power generated for captive consumption for production of aluminium is included under the aluminium segment. Aluminium is considered to be the “metal of the future” for India, considering its wide range of applications across various sectors. In addition to the electrical industry, which has been the predominant aluminium consuming sector in the country for a long time, substantial growth prospects are now also seen in new areas such as defence (e.g. building of aero structures, military helicopters) automobile (body, components) sector, etc. Opportunities also exist in the downstream and value-added product segment, e.g. sheets, extrusions and castings. The domestic market size is likely to show considerable increase in the near future, in view of large infrastructure requirements and other expanding end-user segments in the country. Future growth prospects for aluminium in the country are strong in products like cookware, beverage cans, foils, alloy wheels, railway coaches, etc. There also appears to be considerable potential for increased usage of aluminium in the housing sector, in view of the emphasis on sustainable growth and limiting environmental degradation. NALCO has achieved remarkable growth in production in all fronts, with bauxite production at 18.81 lakh tonnes, registering a 10.4% growth, while alumina production was also higher at 5.26 lakh tonnes for the last quarter. Analysts are betting on NALCO stock for a 30% price appreciation in the next 6-9 months.

Indian equity benchmarks extended their southward journey for the fourth straight session, breaching their crucial 9,850 (Nifty) and 31,600 (Sensex) levels on escalating tensions between the United States and North Korea. Markets started the session on a pessimistic note and traded sluggish throughout the day, as geopolitical worries continued to weigh on the sentiments. In the latest escalation of tensions between Washington and Pyongyang, the isolated Asian country threatened a missile strike on the US territory of Guam. 

Back on regional turf, traders remained concerned with the report that India’s retail inflation is expected to have picked up slightly in July after cooling in the previous three months, but should remain well below the Central bank’s 4% medium-term target. Sentiments also remained downbeat on a report that India’s agricultural exports have declined significantly over the last two years. The primary reasons for a decline in the export of agricultural commodities are low commodity prices in the international market, which have made exports uncompetitive. Positive news such as contraction in refund outgo, rich dividends from “Operation Clean Money” and more people coming under the income tax net post demonetisation failed to ignite the traders. Investors also ignored the view that despite certain teething problems under the new tax regime, the Goods and Services Tax (GST) should lead to considerable increase in the GDP in the next few months. Traders are expecting the markets to be on a downward swing next week on the back of profit booking and bear selling pressure.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

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