Why are Hindustan Zinc shares rallying post import duty hike? Explained

Shares of Hindustan Zinc Ltd rose more than 4% in Wednesday’s trade after the government increased customs duty on silver imports, a move that is being seen as positive for domestic producers of the precious metal.

The stock was trading at ₹669.60, up 4.32% on the NSE, after hitting an intraday high of ₹676.80.

Investor sentiment turned positive after the Ministry of Finance issued a notification increasing customs duty on several silver-related imports from 5% to 10%, effective immediately. The revised duty structure applies to silver bars and other specified silver products under customs tariff classifications.

The government notification also introduced a new entry covering spent catalysts or ash containing precious metals, which will attract a 10% duty till March 31, 2027.

The move is expected to support domestic silver producers and refiners by making imports more expensive, potentially improving local pricing dynamics.

Hindustan Zinc is seen as one of the key beneficiaries of the development due to its significant exposure to silver production. The company sells silver in the domestic market, and silver has increasingly become a major earnings driver for the Vedanta Group company.

According to recent company data, silver contributed nearly 50% of EBIT in the fourth quarter, sharply higher than its 10-year average contribution of around 29%. This rising contribution has made the company more sensitive to silver price movements and policy changes related to the precious metal.

Market participants believe the customs duty hike could improve domestic silver realisations and support profitability if global silver prices remain firm.

Hindustan Zinc is India’s largest integrated zinc producer and among the world’s leading silver producers. Apart from zinc, the company has exposure to lead and silver production from its mining operations across Rajasthan.

The stock has remained in focus in recent months amid volatility in global commodity prices and expectations of stronger precious metals demand. Silver prices globally have also stayed elevated due to industrial demand linked to solar energy, electronics and EV-related applications.

Analysts note that any sustained rise in domestic silver prices could positively impact Hindustan Zinc’s margins, given the increasing importance of silver within its earnings mix.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice.