The recent correction in commodities has sparked concerns among investors, but a market expert Dharmesh Kant of Cholamandalam Securities believes that the pullback should be seen as an opportunity rather than a warning sign. Speaking to ET Now, Kant said the broader commodity cycle remains intact, supported by improving global demand, infrastructure spending and India’s economic momentum.
Copper, aluminum, crude oil and silver have all seen sharp declines in recent sessions, leading to commodity stocks lower. However, Kant believes that such corrections are an integral part of long-term commodity cycles.
“Commodities as an asset class are always like this. Whenever the upside potential is there, it continues for one or two years. We have already seen a lot of the bull cycle, and normally it corrects and consolidates for a significant period of time,” he said.
According to Kant, demand fundamentals remain favorable. He expects industrial demand for metals such as aluminum, copper and zinc to strengthen as global economic activity improves. Silver also continues to enjoy structural support due to its widespread use in electric vehicles, electronics, and renewable energy.
“Request for money has an industrial connotation. Electric vehicles, electronics and solar panels all use silver, and demand is likely to increase at a CAGR of 15-17% in the future,” he said.
In this context, Kant believes that quality commodity companies deserve new attention.
“This is a good opportunity to accumulate stocks of good quality raw materials. Hindalco, Vedanta And JSW Steel. We still think there is at least a year to a year and a half of valuation cycle left,” he added.
Lower crude prices to help company margins
Kant also expects a sharp drop crude oil price to provide a significant boost to company profitability in the coming quarters.
He noted that while businesses may see some impact in the June quarter, the benefits of lower input costs are expected to become much more visible in the second half of the financial year.
“The second and third quarters will benefit from lower input costs, but price cuts will never occur. This will support better profitability in the second half,” he said.
He also believes that easing tariff concerns and resilient domestic demand have strengthened India’s macroeconomic outlook.
“Our field checks suggest that there has been no slowdown in consumption, credit demand or collections. Credit growth itself will be around 17-18%, and these indicators suggest that now is the time to be bold on selection,” Kant said.
Defense history remains intact
Despite the recent volatility of defense stocksKant remains optimistic about the sector’s long-term prospects. If he is less constructive on Bharat Dynamics, he continues to favor Bharat Electronics (BEL), Hindustan Aeronautics (HAL) and Mazagon Dock Shipbuilders.
Recent selling pressure, he said, has been largely driven by trading positions and news flow rather than any deterioration in fundamentals.
“It’s a no-brainer if you look at it from a three-year perspective. HAL, BEL and Mazagon Dock remain strong stocks in the long term,” he said.
Kant also highlighted the potential of the long-awaited P-75 submarine project, which could significantly increase Mazagon Dock’s order book and transform its growth trajectory.
Cautious on AI-themed stocks
On the topic of investing in artificial intelligence in India, Kant advised investors to separate real long-term opportunities from market narratives.
On Sterlite Technologies, he acknowledged the company’s strong order book but questioned the sustainability of its business model.
“There is no intellectual property or gap in the sector. It has remained largely a commercial activity for the last 10 to 15 years, so we remain apart from the fundamental appeal,” he said.
Banking services are preferred over automobile and accessory services
Among the sectors that could benefit from the drop in crude prices, Kant prefers banking and financial services on automobile and automobile component manufacturers.
Although paint makers have already recovered significantly from recent lows, he believes high valuations and intense competition limit their upside potential. Automakers and ancillary companies, meanwhile, could struggle due to a high base effect in the second half.
“If you look at a one- or two-year perspective, they might struggle to generate 20-25 percent profitability growth. It’s a tactical decision to stay away for now,” he said.
On the contrary, he believes that the banking sector remains the main indirect beneficiary of improving macroeconomic conditions and falling energy prices, making it one of the sectors favored by investors in the coming quarters.
