Sterlite Industries’s Stock Surges as Metals Gain

Posted by on Jun 21, 2010 | Leave a Comment

The India’s BSE share prices climbed to highest in over two months, after China declared to do away with Yuan’s fixed rate against dollar as investors were encouraged to take more risks.

The India’s largest zinc and copper producer, Sterlite Industries (India) Ltd. surged the most in over a year after China has seceded to move an end the Yuan’s fixed rate in accordance to the metal prices lifted in dollars.

Logo of Sterlite Industries (India) Ltd.

Sterlite Industries

The price of the share of Larsen & Toubro Ltd., the largest private-sector infrastructure company in India was raised to the highest from four months.

Sterlite Industries’s shares rose as much as 10 % to 186.80 rupees which is the biggest gain since May 18, 2009 at Bombay Stock Exchange. At 185.25 rupees, the shares traded at 12:01 p.m. in Mumbai. On the BSE Metal Index, the stock was the top performer today. The fifteen member gauge rose as much as 5 % to 15,555.83 which are the highest since May 17.

On June 19, 2010, The People’s Bank of China declared that it was ready to make Yuan more flexible as the global economy is recovering form recession and the country is observing a balanced trade. The declaration resulted into the rise in prices of copper and other base metals on June 21, 2010.

After China two days ago signaled an end to the Yuan’s fixed rate to the dollar, Copper increased as much as 4.6 % to $6,729.75 a metric ton on the London Metal Exchange, and zinc added as much as 5.3 % to $1,821.75 a ton and aluminum rose as much as 3.9 % to $2,019 a ton. A move that may encourage the country’s purchasing power.

Nikhil Agarwal, an analyst at Kim Eng Securities India Ltd. in Mumbai said, “China’s decision to allow flexibility in Yuan has given a boost to metal prices, which is impacting the company shares.” He has a “buy” rating on Sterlite’s shares.

India’s top aluminum producer, Hindalco Industriles Ltd. raised as much as 5 % to 152.55 rupees that is a -month high. Hindustan Zinc Ltd., a Sterlite unit increased 4.9 % to 1,022 rupees, which is the most since March 4.

During the April, Sterlite agreed giving holders a bonus share for every one held and the share would halve the face value to 1 rupee. Head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, Alex Mathews said that these changes effected today, the shares have made the shares more attractive to investors.

Sterlite Industries is a public company. It traded under the ticker SLT at the NYSE in the form of ADS (American Depositary Shares) since 2007.

Sterlite’s products include copper cathodes, and cast copper rods, including 11 mm and 12 mm rods used in the transformer industry, and 8 mm rods used by the wires and cables industry with applications in housing wires, electrical cables, and telecom cables. The company also connects in the mining of bauxite, and the production of aluminum conductors and various aluminum products, with in the taking out of zinc ore, and in the manufacture of zinc ingots and lead ingots. Additionally Sterlite Industries also manufacture various chemical products like sulfuric acids, phosphoric acids, phospho gypsum, hydro fluo silicic acids, and granulated slag. Hindustan Zinc Limited is subsidiary of Sterlite Industries.

The company has registered on November 15, 2006 with issued 150,000,000 ADS at US$ 13.44 per share and representing as one underlying equity share per ADS.

Vice President – IIFL Private Wealth Management, India Infoline, Anu Jain said that Sterlite Industries has target of Rs.720.

Jain told CNBC-TV18, “I think it’s just a trend for the day and apart from that the fact that Sterlite is on support level, so on Friday it had shown that it is probably testing the support but with the news given today I think there will be added bonus to it. So at about Rs.678 where it closed, I am sure it is going to open a percent or two higher but with a stop loss of about Rs.665, Rs.720 looks possible as a swing target.”

She also added, “Intraday also you can see about 3% odd move, which will definitely come in, so it opens about 1-1.5% higher for day trader there would be a scope of 2%. It could surprise on the upper side because metals have been subdued and copper is doing well, so I would play this on the positive side.

Vice-President, Karvy Stock Broking, Ambareesh Baliga said, “China’s Yuan move is helping risk-taking ability. Also, commodities are doing very well, helping the market further.” The big encouragement to invest would also view in Insurance companies as the government will allow life insurers to offer “unit-linked plans.”

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