Higher Prices & Policy Support: This sector seen staging a strong comeback in 2026—Key points in HSBC report

India’s metals and mining sector could be headed for a turnaround in 2026 after a patchy and largely subdued 2025. Firmer prices, supportive policy moves and better global cues are expected to improve sentiment and earnings across the sector, particularly for steel producers. According to a recent report by HSBC Global Investment Research, this year could mark a return to momentum for Indian metal companies as domestic demand remains steady and some pricing power begins to come back.

Analysts at the brokerage wrote that while global markets in 2025 were driven mainly by swings in metals such as copper and gold, the outlook for Indian steel and related segments looks more constructive next year.

What's likely to support the sector?

Add Zee Business as a Preferred Source

The brokerage has attributed primarily three factors behind the expected bounceback in the domestic metal space:

• Weakness in the US dollar
• Tighter supply conditions in key metals
• Policy support at home

The analysts expect these factors to work in the sector’s favour. They also point out that institutional ownership in Indian metal stocks remains relatively low, leaving room for fresh inflows if earnings visibility improves.

Why does 2026 look different for Indian metals?

After a challenging 2025, when domestic steel prices traded at sharp discounts and margins came under pressure, the outlook is now “improving on the margin”, the report said. One of the biggest changes has been policy support in the form of safeguard duties on flat steel imports, which are expected to act as an earnings floor for domestic producers over the next three years.

This policy cushion comes at a time when Indian mills have already begun to push through price increases.

The report added that steel equities, which lagged base metals during the last cycle, could start to catch up in 2026 as pricing improves and investors reassess the sector’s earnings stability.

While December’s increase of about Rs 2,000 per tonne has already been implemented, mills are expected to test the market further with additional hikes of Rs 1,500–2,000 per tonne in January. Together, these moves could help stabilise margins after a period of volatility.

As a result, while earnings in the first half of calendar year 2026 are expected to benefit from recent price hikes, some pressure could still be felt before the full impact of policy support and demand recovery flows through.

Global cues turning supportive

Beyond domestic factors, the global macro environment is also expected to play a supportive role. The report pointed to a weaker US dollar as a positive for commodity prices, along with supply-side challenges in metals such as copper and aluminium. These constraints are likely to keep global prices firm, indirectly supporting sentiment towards the broader metals and mining space.

At the same time, balance sheets across the Indian metals sector are seen to be far stronger than in previous cycles. Years of deleveraging and improved capital discipline mean that many companies are better placed to weather short-term volatility and benefit from an upturn when it materialises.
“Institutional under-ownership in the context of strong balance sheets, compared with previous cycles, and supportive policy means the sector should remain in favour in 2026,” the report said. This is particularly relevant for steelmakers, which have historically traded at a discount during periods of weak pricing but tend to re-rate quickly once earnings stabilise.

Domestic demand remains a key pillar

On the demand side, India’s structural growth story continues to provide a solid base. This domestic demand resilience, combined with policy protection and improving global cues, is seen as a key reason why 2026 could mark a turning point for the sector. While the medium-term outlook appears constructive, the report emphasised the importance of monitoring a few critical variables.