However, analysts aren't so sure, and they caution that these stocks could be potential value traps since fundamentally there have been no concrete signs of recovery in global demand or price.
Recovery in some small-cap meal companies have been even more impressive. Orissa Sponge Iron and Steel has surged about 244 per cent from its 52-week lows, Ess Dee Aluminium has gained 190 per cent, while Welspun Corp has risen about 125 per cent from its recent lows.
"Global outlook for the metal sector continues to remain hazy amid falling demand in China, US and Europe," said Dipen Sheth, head -institutional research at HDFC Securities. "However in domestic markets, the imposition of import duty on steel products has given positive rub-off effect on stocks."
But the overall performance of metal companies so far this year continues to remain disappointing: Vedanta has dropped 53 per cent year to date, Hindalco has fallen 47 per cent, while Tata Steel has declined 38 per cent in this period. All these stocks have dropped more than the BSE Metal Index that has fallen 32 per cent this year.
The valuation of metal stocks continue to remain expensive: Hindalco is currently trading at 15-times price to earnings (P/E) multiple on one-year forward earnings, and it's in expensive zone compared to 5-year average P/E multiple of 9-times, according to Bloomberg data.
Tata Steel is currently trading at 17-times one-year forward earnings against its historical average of 10-times, while Vedanta is trading at 7.35 times compared to its 5-year average of 6.4 times.
"The best wagers from very short-term angle are metal socks. We think they have bottomed out and may rise 20-30 per cent by December this year," said Mehraboon Irani, principal and head - private client group business, Nirmal Bang Securities.
Source: http://economictimes.indiatimes.com/