Hindustan Copper, MCX, Hindustan Zinc, HAL shares: What should one do these names?

Abhishek Basumallick, co-founder and fund manager at Shree Rama Managers, on Thursday said metals or metal-related stocks were generally cyclical in nature and that investors need to be very careful while dealing in them.

When the going is good, these stocks can move up very fast, he told Business Today, adding that, “When the going is bad, they will, you know, move down equally fast.”

Replying to a question on what investors should do with stocks such as Hindustan Zinc Ltd, Hindustan Copper Ltd, MCX and gold finance companies that are linked to metals, Basumallick said that, as an investor, one must not be investing in these companies in the first place.

“You can do that as a trader,” he said.

Basumallick explained that investors often get trapped in metal stocks and do not get an exit when prices fall. “It is very difficult call to take, you know,” he said. “You know, you trade in and out of these positions. But for long-term investments, these are not the best of bets,” he added.

Basumallick said that if an investor already has holdings in any of these stocks and has a very clear view on the underlying metal, they may choose to hold on or start selling slowly.

“But I would always be very, very skeptical of buying, keeping investment positions in these kinds of companies,” he said.

On Hindustan Aeronautics Ltd (HAL), Basumallick said the defence PSU has been perennially underperforming and has been unable to deliver what has been ordered to it on time. The stock was under pressure on Thursday amid reports that the defence PSU was excluded from the development of the Advanced Medium Combat Aircraft (AMCA) programme, the fifth-generation stealth fighter aircraft, as it did not meet the mandatory criteria.

“I don't remember any time when HAL was able to deliver,” he said, adding that it is very important for companies and management to be held accountable.

“And I hope that this kind of a snub that have been given to them, the management sort of realizes that they need to get their act together. And ultimately, it is in the benefit of the country because they are in a very, very sensitive sector. We need aircrafts, we need helicopters, etc., that HAL produces. And they've actually been doing not a great job. So, personally, I think it's been, it should act as a wake-up call for them.”

Basumallick said that if the company is able to get its act together, the opportunity size is very large. “There is going to be a short-term, medium-term hit because of this, because of the news,” he said.