INSUBCONTINENT EXCLUSIVE:
Amid Russia-Ukraine tensions, commodity stocks are seen as the biggest gainers.Financial markets don't like uncertainty, strife,
and disruptions.The situation between Russia and Ukraine is triggering all that and more.There were worries about interest rate hike and
high inflation but now this has combined with the Russia-Ukraine war.Intraday price movements of 5-10% are getting frequent
Not just for stocks, but benchmark indices, commodities, and currencies too are triggering such sharp movements.The escalating war has sent
commodity and energy prices soaring, boosted safe havens gold, silver, and palladium to near their all-time highs
Meanwhile, it has sent currencies and Russian share markets down in the dumps (although Russian markets have recovered a bit).The effect is
felt on Indian markets too.The Indian rupee hit a lifetime low as a sharp surge in global crude oil prices threatened to push up imported
inflation and widen India's trade and current account deficits.Amid these rising tensions, commodity stocks are seen as the biggest
gainers.Why?Russia and Ukraine are both natural resource rich
They can swing prices of resources they export due to the size of their export trade.Russia is one of the world's biggest exporters of key
raw materials including natural gas, crude oil, wheat, palladium, and aluminium
So the possible exclusion of supplies from Russia due to sanctions has sent traders and importers into a frenzy.Air and sea shipments are
Metal buyers are scrambling for replacement supplies.This has resulted in various commodities soaring to multi-year peaks.The S-P GSCI
index, a broad barometer for the price of global raw materials, jumped last week, and saw the sharpest rise on records dating back to 1970
It is now at its highest level since 2008.Since 2020, commodities have had a fantastic run on the back of strong demand
The term ‘commodity supercycle' sparked a debate on whether the world is entering a commodity cycle or a 'supercycle', an extended phase
of abnormally high prices that lasts at least a decade.But now, it seems that the Russia-Ukraine war has boosted commodities.Commodity
stocks in India tracking the underlying commodity have already started seeing the effect in their stock prices.Stocks related to metals like
steel, aluminum and copper, which find their application in almost every product used, have rallied.Let's take a look at the top five stocks
that are poised to benefit the most as the commodity supercycle gets a war boost.#1 HindalcoStocks related to aluminum are seen as the
biggest beneficiaries of the Russia-Ukraine war.Russia is a major exporter of aluminium
In 2021, the country produced about 3.9 metric tonnes of aluminium (6% of world supply), according to SteelMint.Globally, the aluminium
market was already facing a deficit due to production cuts in Europe amid high energy prices
This combined with restricted supply from China.As aluminium will most likely face a supply crunch amid the sanctions on Russia, prices will
go up.Could go up or are already up? Well, the prices for the world's most widely used base metal have been rallying for weeks now.And the
two stocks which are impacted by aluminum prices directly are Hindalco and NALCO.With its strong balance sheet, big capex plans
and reducing debt, Hindalco's stock has already started to show an up move.But though aluminium prices support Hindalco, there are cost
Hindalco hedges part of its aluminum price exposure.Another company set to benefit is NALCO.NALCO is a pure play and has the highest
leverage to aluminium prices
An increase in price of alumina, a raw material used to produce aluminium, also supports the company as it also sells alumina.The company
doubles it earnings on every $400 a tonne increase in aluminium price.#2 Coal IndiaWhile benchmarks Sensex and Nifty are down about 12% from
their peaks, one stock which was termed as India's dead stock by many (like ITC), has gained a massive 20%.No prizes in guessing the
name. Coal India has made headlines these past few weeks after waking up from years of underperformance.Russia is the world's
third-largest exporter of coal.Russian coal is crucial for China since it effectively banned imports from Australia amid a trade spat.There
are expectations that thermal coal is likely to find support from investors again as Europe increases consumption of thermal coal in its bid
to reduce its reliance on Russian gas.As coal prices rise, the prime company to benefit from this is Coal India
The company produces more than 80% of the coal in India and is the largest producer of coal in the world.It offers different varieties of
coal to several industries, including power, cement, and fertilisers.An added safety here for you dear reader, is that the company sits on a
It uses the cash reserve to pay dividends consistently.#3 Tata SteelA couple of days ago, Indian steel makers hiked the prices of hot-rolled
coil (HRC) and TMT bars by up to Rs 5,000 per tonne amid supply chain disruptions due to Russia-Ukraine war.Steel prices have rallied
recently and if we are to go by industry experts, they are expected to go up further in the coming weeks with the Russia-Ukraine crisis
deepening.How do Indian steel makers benefit here?Though steel companies primarily benefit from a spike in steel prices, realisations from
exports could also see a rise which will bode well for them.Russia and Ukraine together supply around 40 m tonne steel in the international
The sanctions imposed by various countries has hurt the export market
It seems that both Russia and Ukraine won't be able to resume exports in the near future.The top companies poised to benefit from this are
Tata Steel, JSW Steel and SAIL
As the demand is buoyant, there will be price hikes.Recently, Tata Steel's CEO T V Narendra said,Both Russia and Ukraine are manufacturers
and exporters of steel in addition to being suppliers of raw materials including coking coal and natural gas
The unfolding Russia-Ukraine crisis will impact supply-demand dynamics, input costs and the overall global economy.While rising steel prices
are good for steel makers, market experts suggest that sharp jump in prices of iron ore, a major raw material, may spoil the party
Under such conditions, steel companies with captive iron ore mines stand to gain the most.Over the past two weeks, steel stocks have
showed an uptick which shows their dependence on steel prices.Equitymaster on the recent boom in commoditiesTo understand the situation
better, we reached out to Ace Chartist at Equitymaster and editor of Fast Profits Report Brijesh Bhatia.Here's what he has to say on the
current situation…As a technical analyst, the first thing you learn is “the history repeats itself” and that's exactly what is
happening in commodity space.Is the Russia-Ukraine war triggering the commodity super cycle?No! If you are following my videos, I have
highlighted “An Exciting New Trading Opportunity” in January 2022 much before the Russia-Ukraine talks.Thomson Reuters Commodity CRB
Index is a commodity futures price index in 1957
Index broke out of 69 months consolidation zone in May 2021 and heading higher.As the chartist says, the history repeats itself and
surprisingly it repeated after 18 years
In 2003, the time-cycle breakout of 69months took index to 350+ from 200, the stellar rally of 75% in the span of three years.I believe this
is just the start for the commodity cycle which can continue till 2023-2024; not the linear one which was in 2003-2006.Stay invested in
Commodity!The overall picture for 2022 when it comes to commodities…Last month, we reached out to India's #1 trader Vijay Bhambwani, to
ask him about what's the course of action in this situation.Here's what we asked…Give us the overall picture for 2022 when it comes to
How should traders be placing themselves to profit from it.To which Vijay replied…A savvy trader is like a python
A python doesn't feed daily
But when it does, it swallows an entire animal of prey at one go.Right now markets are nervous, on the edge of their seats and are living in
Which is why you see 10-15% price moves intraday.We need to wait for the interest rates to rise and accelerate
So far it was the smaller economies like Poland, Hungary, Romania, Peru, Argentina, Brazil etc that were hiking rates.The manic price rise
in all asset classes will possibly be slowed in the first half of the year and possibly even reverse in the second half
That is when markets will respond to conventional studies and trading systems
Predictability will be possible then
Right now we are staring at our trading terminals and news telerate tickers for breaking news to wait and watch where prices are being
tossed around.Once rate hikes sober markets sentiments, it will be action time again.Happy Investing!Disclaimer: This article is for
information purposes only
It is not a stock recommendation and should not be treated as such
This article is syndicated from Equitymaster.com(This story has not been edited by TheIndianSubcontinent staff and is auto-generated from a
