Hindustan Zinc shares snapped their four-day gaining streak on Monday, December 29, falling 3.2% to ₹616.60 as silver prices declined over 8% after extending their record run to hit an all-time high of $68 per ounce. The stock dropped 6% from its intraday high of ₹656, reflecting the volatility in precious metal markets.

Silver's Historic Rally and Correction

Silver prices have delivered an extraordinary performance, beginning the year below $30 and rising more than 170% with three trading sessions remaining. This positions the white metal for its best calendar year performance since 1979, when it gained 200%.

On the MCX, silver prices declined 8% from the intraday high of ₹2.54 lakh per kg, highlighting the significant correction after the record-breaking rally.

Market Dynamics and Supply Constraints

Speculative inflows, industrial demand, and supply deficits have been the primary drivers powering silver prices higher. Analysts indicate that trading positions on paper are now being covered with physical volume, creating a supply shortage to meet demand requirements.

Peter McGuire, CEO of trading.com, emphasized the momentum's strength, stating it remains too early to consider shorting silver. "If you would have told me that this time last year, I would have laughed, and I would have said I don't think it can get there, but now it has, and we have got a couple of days left of trade, so we might even punch out 180%," McGuire told CNBC-TV18.

Hindustan Zinc's Market Position

Vedanta's subsidiary Hindustan Zinc remains India's only listed silver play, with promoter Vedanta maintaining a 61.9% stake as of the September quarter. At the day's highs, the company commanded a market capitalization exceeding ₹2.7 lakh crore.

December Rally and Future Outlook

The stock has gained 40% year-to-date, with most gains concentrated in December as silver prices surged. The recent correction reflects the inherent volatility in precious metal markets, though the underlying supply-demand dynamics continue to support elevated price levels.

With trading momentum remaining strong and supply constraints persisting, market participants are closely monitoring whether silver can maintain its historic gains through the remaining trading sessions of the year.

Silver prices reached a new record high of $82.00 per troy ounce, boosting focus on Hindustan Construction Company , one of the world's top five silver producers with 800-tonne annual capacity.

Silver prices extended their remarkable rally, clinching a fresh record high of $82.00 per troy ounce before paring gains to around the $80.00 level. The surge has been driven by multiple factors including low supply, rising demand, and an easing monetary policy cycle by central banks, putting Hindustan Construction Company shares in focus for trading.

Strong Silver Exposure Drives Focus

Hindustan Construction Company stands among the world's top five silver producers, with an annual capacity of around 800 tonnes. The precious metal serves as a meaningful profit driver for the company, contributing nearly 38% of its EBIT. This significant exposure positions the company as a direct beneficiary of the current silver price rally.

Brokerage Outlook and Stock Performance

Jefferies initiated coverage on Hindustan Construction Company with a Buy rating and a target price of ₹660, implying approximately 4% upside from current levels. The brokerage sees the company as a clear beneficiary of higher silver and zinc prices, aided by its first-decile zinc mining costs.

The stock has already delivered impressive returns, rising 44% in the year to date and 28% over the past month. Despite trading at 9.20x FY27E EV/EBITDA—above its long-term average of 7.30x—Jefferies believes the premium is warranted given silver's rising share in overall profitability.

Earnings Growth Projections

While volume growth is expected to remain modest, earnings momentum is set to stay strong. Jefferies projects EPS growth of 22% in FY26 and 29% in FY27, followed by another 7% increase in FY28. This outlook is underpinned by robust cash generation and healthy return ratios, with FY26–28 EPS estimates placed 9–31% above broader Street forecasts.

Silver prices have surged 172% to around $82.00 at spot, while Hindustan Construction Company expects the global silver market to remain in deficit. The company has assumed silver prices of $56.00–60.00 for 2HFY26–FY28, approximately 3–10% below prevailing spot levels.

Cost Efficiency Improvements

Cost efficiency has improved meaningfully across operations. Zinc cost of production (excluding royalty) has fallen from a peak of $1,257 in FY23 to $1,002 in 1HFY26. This improvement has been driven by several factors:

• Better ore grades
• Increased use of domestic coal
• Softer international coal prices
• Growing share of renewable energy

Looking ahead, costs are expected to remain largely stable over FY26–28E, as continued efficiency gains and higher renewable power usage are likely to offset the impact of deeper mining operations and fluctuations in ore quality.

With nearly 37% of its 2HFY26 silver volumes hedged at $37.00, most of the upside from higher prices is likely to flow through in FY27, delivering a meaningful boost to EBITDA.