Foreign investors pulled $961 million (approximately ₹9,201.14 crore) from India's metals and mining stocks in June, the biggest monthly outflow since August 2023's $1,266 million, according to data from National Securities Depository Ltd, as global investors retreated from cyclical commodities. While the selling appears driven more by portfolio rebalancing than a structural retreat, analysts say the bigger concern is that earnings estimates for the sector may still have further to fall.
Global investors have been cutting exposure to cyclical commodities as uncertainty over global growth, US trade policies, China's demand outlook and a stronger US dollar clouds the sector's outlook. Given their highly cyclical and volatile nature, metal stocks are often among the first to see foreign money head for the exits during periods of heightened risk aversion, market participants said.
The selling also comes after the Nifty Metal index gained more than 13% so far this year, shifting investor focus from the sector's rally to whether earnings can keep pace.
The June outflow reversed almost 79% of January's ₹11,526 crore inflow, according to Karthick Jonagadla, smallcase manager and managing director and chief executive of Quantace Research, who said it was “too large to dismiss as noise but not enough to call a structural exit”.
Downgrades ahead
According to Jonagadla, the real risk is not an earnings collapse, “but that positive growth no longer produces upgrades”.
He said the tactical element reflects a crowded-position reset amid broader macro de-risking, while the fundamental element is a higher earnings-quality hurdle as coking coal, energy, freight and currency pressures challenge margin retention.
The market still expects the Q1FY27 metals universe to deliver 20% revenue growth, 26% Ebitda increase, and 22% net profit growth year-on-year, he said. That suggests share prices have corrected faster than near-term earnings, but the downgrade cycle is not over.
“FY27 Ebitda estimates have already been cut by 6% for Tata Steel, 5% for SAIL and 2% for JSW Steel,” he said.
Ferrous producers look relatively better supported by domestic pricing and spreads, while globally linked non-ferrous names remain more vulnerable to commodity-price reversals. The real entry signal, according to Jonagadla, is sustained margin resilience and stable guidance, and not simply a lower multiple.
“For metals exposure today, I would use a four-part barbell: 45-50% in integrated domestic steel, 25-30% in primary non-ferrous producers, 10-15% in gold and silver exposure, and around 10% in selective downstream names with demonstrable pricing power. Ferrous offers the stronger near-term earnings floor, with Indian steel demand expected to grow 9-10% in FY2027, while non-ferrous provides structural upside through domestic demand growth of 7-9.5%,” added Jonagadla.
In a report released last week, Equirus Securities said India's ferrous sector outperformed between December 2025 and April 2026 on expectations of lower Chinese steel production, fewer exports from China and a sharp recovery in domestic steel profitability. However, after the January-April rally, steel prices have cooled while raw material and operating costs remain elevated.
“Although steel stocks have corrected over the past two months, we believe downside risks to both volumes and profitability persist, with FY27E earnings downgrades likely over the next three quarters.”
On the non-ferrous side, Equirus said a sharp correction in aluminium prices on the London Metal Exchange, coupled with faster West Asia capacity restarts and fresh Indonesian supply, could keep prices range-bound and raise the risk of FY27-28 earnings cuts.
Equirus continues to prefer iron ore miners over steel producers, with Lloyds Metals and Energy remaining its top pick. Within steel, its preference order is Jindal Steel & Power, followed by JSW Steel, Tata Steel and Steel Authority of India (SAIL).
Selective bets
“The recent correction has certainly made valuations more reasonable compared to where they were a few months ago,” said Sanjeeb Hota, head of equity strategy at Standard Chartered Securities India.
He said companies with captive raw material advantages, a higher value-added product mix, strong balance sheets and ongoing capacity expansion are better placed to sustain earnings. Businesses that rely primarily on commodity spreads, however, could continue to face earnings volatility and downgrades if global prices soften further. Investors should therefore remain selective rather than take a broad-based overweight call on the sector.
“While the June quarter may see seasonally softer volumes because of the monsoon, better realizations are expected to cushion earnings for most companies.”
Hota said the June selling does not necessarily point to a sharp deterioration in earnings prospects. Instead, it appears more like portfolio rebalancing against a more cautious global backdrop.
Even so, he said the biggest risks remain global. Any sharp slowdown in China, aggressive steel exports from China, weaker global commodity prices, trade restrictions, or significant volatility in raw material costs such as coking coal could weigh on profitability.
Export-oriented companies also face uncertainty from evolving trade policies in Europe and the US, he added.
Valuations hold
The sector remains one of this year's better performers despite the recent foreign selling.
Since the West Asia war began, Welspun Corp Ltd has surged 95%, followed by Adani Enterprises Ltd and Lloyds Metals & Energy Ltd, which have gained 46% each. At the other end, APL Apollo Tubes has fallen 18%, while Jindal Steel Ltd and Hindustan Zinc Ltd have declined more than 15% and 11%, respectively.
Yet valuations indicate investors are still pricing in a recovery. Most Nifty Metal companies continue to trade above their five-year average valuation multiples. Jindal Stainless Ltd, for instance, trades at 20.77 times earnings, compared with its five-year average of 15.51 times, while Steel Authority of India Ltd trades at 21.45 times versus a five-year average of 16.97 times.
There are, however, a few exceptions. Lloyds Metals & Energy Ltd is trading at 31.71 times earnings, below its long-term average of 33.86 times, while Hindustan Copper Ltd is valued at 52.38 times versus its long-term average of 59.16 times.