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News Topical, Digital Desk : Kotak's latest report on the aluminum sector has caught investors' attention. Aluminum prices have fallen nearly 7% from recent highs to $3,030 per tonne, but they are still around 20% above the FY25 average. The report states that while a strong dollar and expectations of lower rate cuts have created pressure, the sector's fundamentals remain strong. Vedanta has been identified as a top pick.
Why did aluminum prices fall?
According to Kotak, aluminum prices recently fell by about 7% to $3,030 per tonne. The main reasons for this decline are
the expectation of a lower interest rate cut.
Dollar strength
Bullion (gold and silver) correction -
When the dollar strengthens, commodity prices come under pressure. This is why aluminum also saw profit-booking.
Why is it still 20% higher than FY25?
Although there has been a recent decline, prices are still around 20% higher than the FY25 average. This means that the sector's underlying demand and supply conditions remain strong.
Kotak believes that aluminum's fundamentals remain healthy. Global demand, especially from the EV, infrastructure, and renewable energy sectors, remains strong.
Vedanta is a top pick in the sector
Kotak has named Vedanta as its top pick in the sector.
Vedanta
Target: ₹890
Rating: BUY The brokerage believes that Vedanta's strong cost structure and diversified portfolio make it well-positioned in the current environment. Cautious stance on Hindalco and NALCO Hindalco Target: Rs 850 Rating: SELL NALCO Target: Rs 350 Rating: SELL Kotak believes that given current valuations and margin risks, these stocks have limited upside. Margins could remain under pressure, especially if the dollar remains strong and a rate cut is delayed. What investors should look for next? Dollar index movement signals global interest rates Demand trends from China and the US Demand from the electric vehicle (EV) and infrastructure sectors If aluminum prices sustain above $3,000, the sector could receive support. However, if there is a further decline, companies with weak balance sheets could be more affected. Kotak's report clearly conveys that despite the recent decline, the fundamentals of the aluminum sector remain strong. However, stock selection will remain crucial. While Vedanta has a BUY recommendation, Hindalco and NALCO have a SELL recommendation. This is the time for investors to select the right companies within the sector, as there is no uniform view of the entire industry.
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