Even as Nifty 50 and Sensex enter into a consolidation phase after some violent moves in both directions, there are stocks from specific sectors that are luring investors with their outperformance. Commodity stocks definitely have caught the fancy of investors after their recent outperformance. There is huge interest amongst investors when it comes to commodity stocks as the conditions are expected to be ripe for them to thrive. Usually, commodity stocks are considered to be proxy for the underlying commodity i.e. if the underlying commodity prices increase it is expected that the relevant commodity stock will gain. When the commodity prices are expected to driftlower, the relevant commodity stocks are expected to underperform.
With the inflation expected to increase as also reflected by rising bond yield both in the US as well as Indian markets, it is a no brainer as to what is expected of the commodity prices. They may get stiffer as we progress into 2021 and that augurs well for commodity stocks across the board. Various research agencies have predicted that the oil demand globally will be back to normal or to the levels seen in December 2019 by early 2022. That means the oil demand will be steady in the coming quarters and one can expect the oil prices to remain steady going forward. Oil prices are already at their two-year highs. It will only be logical to expect the stocks that benefit from rising oil prices to do well in the coming quarters.
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