Remain underweight on metals, says Nomura Financial

Prabhat Awasthi, head of equity research & MD at India - Nomura Financial Advisory & Sec said they continued to remain underweight on metals. According to him, they do not expect rosy news in metals going forward.

Awasthi told CNBC-TV18, “Overall, we have been underweight on metals for a while now and we continued with that. Obviously, lowering commodity prices will impact earnings negatively. The key call would be whether we have seen the bottom of the commodity cycle or not.”
He further added, “To some extent, one could argue that the non-ferrous metals for example have fallen to a level where it will be very hard to make money or lot of capacity globally. Therefore, at some point in time we expect some bounce back. But the process of correction can be elongated depending on the news flow especially from China.”
“If China slows down, then demand side is unlikely to recover. So at this point in time we are continuing with underweight outlook and we will continue to evaluate that sector because stock prices are cheaper. There might be some merit at a point in time looking at the valuations to look back at the sector. But I do not expect rosy news going forward so we continue with the underweight call,” Awasthi added.