Hindustan Zinc shares drop 2% despite silver prices surging to ₹4 lakh, here’s why
There’s an unusual trend in the market. Hindustan Zinc shares fell about 2%, even as silver prices surged to a record ₹4 lakh per kg in recent trading. For many investors, this seems counterintuitive. Silver is a major revenue source for the company, so a spike in silver prices would typically push the stock higher.
Company Overview: Hindustan Zinc
- Largest Zinc & Silver Producer: Hindustan Zinc Ltd. (HZL) is India’s leading integrated company engaged in the production of zinc, lead, and silver. It operates under the Vedanta Group, with the Government of India holding a notable stake.
- Global Presence: Hindustan Zinc is not only India’s biggest zinc producer but also ranks among the leading silver producers globally.
- Business Operations: Covers mining, smelting, and refining metals.
- Revenue Growth: Recent years saw increased production capacity and efficiency, boosting revenues and profits.
- Cost Discipline: Strong earnings supported by commodity price strength and operational cost control.
Silver Price Surge
- Record Prices: Silver recently topped ₹4 lakh per kg, reaching all-time highs.
- Drivers: Global inflation fears, industrial demand (electronics, solar panels, EV batteries), and tight supply.
- Investor Behavior: Seen as a safe-haven and industrial commodity, traders buy for hedging and industrial use.
- Company Impact: Hindustan Zinc’s silver division posted strong year-on-year revenue and profit growth in Dec 2025 quarter.
Reasons for Hindustan Zinc’s Share Drop
- Share Decline: HZL shares dipped ~2% over two sessions despite the silver rally.
- OFS By Promoter: Vedanta’s stake sale increased available shares, reducing open-market buying.
- Discounted Floor Price: OFS floor price below recent market levels drew buyers into the sale, not the market, keeping regular prices soft.
- Technical Pressure: Institutional flows and short-term trading can move prices opposite to commodity trends.
- Supply vs. Demand: OFS subscribed 1.42x for the non-retail portion; market demand concentrated in OFS, not the exchange.
- Summary: Drop reflects short-term supply and positioning, not operational weakness.
Market Analysis & Expert Opinions
- Brokerage Upgrades: HSBC upgraded HZL to Buy, citing a strong metals outlook.
- Market Cap Surge: HZL’s market value crossed ₹3 lakh crore, becoming India’s most valuable metal company due to the silver rally.
- Investor Sentiment: Cautious; some watch technical levels, others wait for OFS completion. Short-term momentum is uneven.
Outlook: Hindustan Zinc & Silver
- Earnings Support: Continued silver strength expected to support HZL’s Q3FY26 and future earnings.
- Capacity Caution: Near-capacity utilization may limit growth unless mining/refining expansion occurs.
- Medium-Term Prospects: Despite short-term softness from OFS, commodity price strength and operational expansion suggest upside potential.
- Analyst View: Additional gains likely from higher silver and zinc prices and improved margins.
Conclusion
Hindustan Zinc continues to gain from record-high silver prices, which strengthen its earnings outlook. The recent 2% drop in shares does not indicate weak business performance; it is mainly due to short-term supply from a promoter stake sale and technical trading factors. Over the long term, the company’s fundamentals remain strong, backed by positive analyst ratings and consistent earnings growth. For investors, this underscores the need to look past short-term market fluctuations. Commodity-linked stocks like Hindustan Zinc may experience sharp moves in the short term, but sustained silver prices and ongoing operational expansion should support the stock over the medium to long term.
FAQS
The decline was largely driven by a promoter stake sale (OFS) from Vedanta, which added more shares to the market. Short-term technical trading factors also contributed to the drop.
Silver recently crossed ₹4 lakh per kg, hitting record levels due to strong industrial demand and safe-haven buying.
Yes. HZL has rising revenues and profits, strong operational efficiency, and remains one of India’s top metal producers.
Medium-term outlook is positive, supported by high silver and zinc prices and potential operational expansion.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
