A tightening global aluminium market is reshaping the metals investment landscape, with Kotak Institutional Equities identifying Vedanta as its top investment idea amid expectations of sustained price support and structural demand growth.
Speaking at the “Chasing Growth 2026” conference, Sumangal Nevatia, analyst at Kotak Institutional Equities, outlined a constructive view on aluminium, citing a widening global deficit and constrained supply dynamics as key drivers.
Global Aluminium Deficit Strengthens Price Outlook
Nevatia said aluminium currently offers the strongest fundamentals among major commodities, as supply growth remains limited while demand continues to expand at a steady pace.He projected structural demand growth of 2% to 3%, supported by long-term industrial and infrastructure requirements. However, production capacity remains under pressure globally.
China, the world’s largest producer, has capped aluminium capacity at 45 million tonnes. Outside China, smelters in regions such as the US, Europe, and Africa are facing power shortages and lack of long-term electricity supply contracts. This has limited the ability of producers to bring additional capacity online.
With limited new supply expected in the near term, Nevatia believes aluminium prices are likely to remain at levels that support new capacity additions but prevent oversupply.
Energy Transition and Data Centres Reinforce Demand
Demand for aluminium is being reinforced by global spending on the energy transition and data centre infrastructure. Aluminium is widely used for its electrical conductivity and structural efficiency, making it essential in renewable energy systems and digital infrastructure buildouts.Another supportive factor is substitution from copper. Nevatia highlighted that the copper to aluminium price ratio is near 4x, significantly above historical trigger levels. This pricing gap is encouraging manufacturers to gradually redesign products to incorporate more aluminium as a cost-effective alternative.
Vedanta Identified as Top Investment Idea
Against this backdrop, Kotak Institutional Equities sees strong potential in Vedanta, with Nevatia indicating a possible 25% to 30% upside in the stock.The brokerage’s preference reflects the company’s positioning within the non-ferrous metals space, particularly aluminium, where global supply constraints and firm demand dynamics are expected to underpin profitability.
Constructive View on Domestic Steel
Beyond non-ferrous metals, Nevatia also expressed a constructive stance on the domestic steel sector. He described it as a consolidating, demand-led story supported by policy measures such as safeguard duties.As steelmakers implement price hikes, he expects profitability to improve. Within the sector, the brokerage prefers non-integrated producers such as JSW Steel and JSPL over integrated players like Tata Steel and SAIL.
With aluminium fundamentals tightening and domestic steel conditions stabilizing, metals remain a key theme in the brokerage’s investment outlook.
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