Hindustan Zinc shares witnessed significant selling pressure on January 8, falling as much as 6.50% to their day's low of ₹588.00. This marked the second consecutive session of decline, with the stock dropping 10.00% over two trading days. The sharp correction comes after silver prices extended their decline, weighing heavily on sentiment around India's largest producer of the precious metal.

Sharp Two-Day Decline After Record Rally

The recent decline represents a significant reversal from Hindustan Zinc's strong performance trajectory. The stock had surged nearly 40.00% in the early part of 2025, climbing from around ₹400.00 to above ₹600.00 before the current correction began.

Silver Price Pressure Weighs on Sentiment

The decline in Hindustan Zinc shares coincided with a sharp correction in silver prices on the Multi Commodity Exchange of India. Silver futures fell by as much as ₹7,000.00 per kilogram, representing a 2.75% drop to ₹2,43,704.00. This weakness in the underlying commodity directly impacts Hindustan Zinc, which produces refined silver with a minimum purity of 99.90%.

Market Expert Views on Valuation

Market participants are expressing caution about the stock's near-term prospects following its substantial rally. Sameer Dalal, CEO of Natverlal & Sons Stockbrokers, noted that while Hindustan Zinc could continue performing well as long as silver prices remain elevated due to increased profitability, the stock has already experienced a sharp run-up.

"Hindustan Zinc could continue to do well as long as silver prices remain high because profitability increases significantly. But the stock has already run up sharply, leaving limited upside for fresh investors," Dalal explained.

Brokerage Outlook and Technical Analysis

Despite the recent correction, Jefferies maintains a positive long-term view on Hindustan Zinc. The brokerage initiated coverage with a target price of ₹660.00, representing potential upside of 5.00% from current levels. Jefferies views the company as a clear beneficiary of elevated silver and zinc prices, supported by its first-decile zinc mining costs.

Technically, Ajit Mishra of Religare Broking suggests the picture remains constructive. The stock has resumed its broader uptrend after breaking out of the ₹480.00-500.00 base with rising volumes. As long as Hindustan Zinc holds above the ₹560.00-580.00 zone, the trend remains positive with potential upside toward ₹650.00-680.00, while ₹540.00-550.00 is seen as key medium-term support.

Despite rising geopolitical tensions and lingering uncertainty around global tariffs, the underlying structure of Indian equity markets may be stronger than headline weakness suggests, according to technical analyst Rohit Srivastava, Founder of Strike Money Analytics & Indiacharts. While Nifty has slipped below recent record highs and Bank Nifty has retreated from the 60,000 mark, Srivastava believes market participants may be reading too much into the apparent fragility.

Technical Structure Shows Improvement

Speaking to ET Now, Srivastava acknowledged the challenging pattern where two-to-three-day rallies are consistently given back over the following four to five days since early December. However, he emphasized a crucial positive development: the formation of successive higher bottoms throughout December.

"The good news is that we have made a higher bottom each time," Srivastava noted, explaining that from early December through mid and end-December, the index has consistently held above previous lows. This pattern suggests downside pressure is gradually weakening, with the analyst expecting similar behavior to continue.

Key Support and Resistance Levels

Srivastava's technical analysis identifies critical levels for Nifty's near-term trajectory:

"That will be the big breakout point where the up move probably accelerates," Srivastava said regarding the 26,540 level, though he cautioned that reaching this threshold may not be easy in the immediate term.

Sectoral Rotation Caps Index Momentum

The analyst attributes the capped index-level momentum to heavy sectoral rotation, which prevents sharp runaway moves but indicates healthier market breadth. Leadership within the market has been constantly shifting, with Reliance Industries cooling off after appearing as a standout performer a month ago, while strength has rotated into metals and banking sectors.

"This is a slowly upward-building market and we are seeing that trend develop across the board, one sector at a time," Srivastava explained, viewing this rotation as a sign of more sustainable market development.

Banking Sector Shows Relative Strength

Srivastava highlighted banking as a clear standout sector, noting that Bank Nifty has been consolidating and declined much less than the broader market. The index is "building a base close to 59,800," with interest rate-sensitive sectors potentially continuing to outperform.

Within banking, his preference is selective, favoring second-line private lenders over heavyweight names:

Preferred Banking Stocks:

• RBL Bank
• IDFC First Bank
• IndusInd Bank

These stocks are showing better relative strength compared to larger, more widely owned names like HDFC Bank and Kotak Mahindra Bank.

Broader Sectoral Outlook

Beyond banking, Srivastava remains constructive on several sectors showing momentum:

• Metals: Continuing to show strength as part of the rotation
• Autos: Maintaining positive outlook
• Real Estate: Early signs of momentum returning, with DLF cited as a recent recommendation

Srivastava's overall assessment suggests that while headline indices may remain range-bound in the near term, the market is quietly laying groundwork for a more sustainable uptrend, driven by rotation and selective sectoral strength rather than broad-based exuberance.