Synopsis: HSBC turns bullish on metals amid supply constraints and strong energy-transition demand. Aluminium prices are expected to exceed USD 3,200/tonne, while Hindustan Zinc offers 7% upside to Rs. 750, Hindalco 30% to Rs. 1,240, and NALCO 13% to Rs. 420.
According to HSBC, metals have significantly revised their prices higher across the board as a result of an optimistic overall outlook. The combination of limited supply, strong demand from industry, as well as its strategic importance for emerging technologies has made metals a highly desirable investment area.
In particular, Aluminum is seen as the most favorable Metal investment; this again can be attributed to the ongoing shortfalls in supply and the key role it plays for Energy Transition Technologies.
HSBC on Metals
According to HSBC, there are a number of macroeconomic and market conditions that are expected to affect the prices of metals in 2026. One of these conditions is supply constraints. Due to a lack of production of certain metals, supply is expected to fall short of demand, resulting in increasing prices for those respective metals. Two examples of such metals that will experience increasing prices as a result of supply shortages are aluminium and zinc.
Another primary driver for future metal pricing is the overall increase in demand for metals from both the energy transition and artificial intelligence (AI) Technological use. As countries globally transition to renewable energy and electric transportation systems, demand for various types of metals, including aluminium, copper, and Zinc will see a notable rise.
HSBC posits that some metals may be experiencing a “super-cycle”, which would indicate that these metals will have a prolonged period of higher-than-average demand and be priced well above average for an extended period of years, and therefore could see increasing prices sustained over the ensuing many years.
Stock Recommendations and Target Price Revisions
HSBC has upgraded Hindustan Zinc from “Hold” to “Buy”, indicating a positive outlook on the company’s future performance. Additionally, they have increased the target price to Rs. 750 from Rs. 520, which is 7% upside from Friday’s closing price of Rs. 698.85, reflecting expectations of strong earnings growth or favourable market conditions.
This suggests that HSBC anticipates the stock will perform significantly better than previously expected, likely driven by supply-demand dynamics or strategic advantages in the zinc market.
HSBC is maintaining a “Buy” rating for Hindalco, which implies confidence in the company’s fundamentals and long-term growth potential. The target price has been raised to Rs. 1240 from Rs. 1060, which is 30% upside from Friday’s closing price of Rs. 950.30, showing an upward revision in expectations for stock appreciation. This may be due to anticipated increases in aluminium demand, cost efficiencies, or broader positive trends in the metals market.
Similarly, HSBC continues to maintain a “Buy” rating for NALCO, with the target price increased to Rs. 420 from Rs. 373, which is 13% upside from Friday’s closing price of Rs. 371.75. This signals confidence in NALCO’s ability to capitalise on market conditions and suggests potential gains for investors in the medium term.
Aluminum Outlook
HSBC has given a unique outlook for the month for aluminium, projecting that prices will exceed USD 3,200 per tonne for the next 4 years based on expected widening deficits that are anticipated to occur in 2026 onwards due to the continued increase in global demand for aluminium and the corresponding development of its production capacity.
As such, the significant increase in demand relative to the level and capacity of production is expected to support higher aluminium prices. Aluminium’s wide range of industrial uses, including construction, manufacturing, transport, packaging, and energy generation, makes it one of the most desirable metal options for many investors and industrial users.
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