“I would say that, you know, metal stocks have seen correction of 20 to 30% and we are heading into Q1 results, which will be very strong, and they are a little bit oversold, so maybe some bounce can be expected, but I don’t think they will go back to the previous highs in a hurry,” Arora said.
His biggest concern is aluminium. He said many analysts are still assuming aluminium prices of around $3,200 per tonne in their forecasts, while he expects prices to fall closer to $2,600 as fresh supply from the Middle East and Indonesia enters the market. That, he believes, could trigger an earnings downgrade cycle for aluminium producers.
“So, I think we will see earnings downgrade cycle, as we move forward… all these things will push aluminium prices to around $2,600 and that is really going to drive the earnings downgrade,” he said.
Arora is similarly cautious on steel. Although Vedanta are also likely to report healthy April-June quarter of 2026 (Q1Fy27) numbers, he believes the sector has already passed its pricing peak. Rising exports from China and aggressive capacity expansion by Indian steelmakers could create excess supply, keeping margins under pressure. As a result, he expects steel stocks to be corrected further, even though they are cheaper than aluminium companies.
On the recently demerged Hindustan Copper
businesses, Arora said the iron and steel unit has already factored in its upcoming expansion, leaving limited upside. He sees the oil and gas business as the only meaningful value opportunity within the group, though regulatory uncertainties make it a high-risk investment and potentially a value trap in the near term.
His cautious outlook also extends to copper. While he acknowledged the positive long-term outlook presented by Hindustan Copper‘s management, he said the stock remains expensive and warned that growing recycled copper supply is being underestimated in demand-supply models, which could weigh on prices.
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Overall, Arora believes any strength in metal stocks following strong quarterly earnings should be viewed as a selling opportunity rather than the start of a fresh rally.
“Metal stocks would see a short-term rally heading into strong Q1, and that should be used as an opportunity to exit rather than to make any longs,” he said.
The key factor that could change his outlook is the US dollar. A sustained weakening of the dollar would support global commodity prices and could improve the outlook for base metals, he added.
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