The Sterlite stock has rallied 8% as yuan flexibility will be a positive for long-term aluminium and zinc prices, reports Pankaj Poddar. At 13:50 hrs, the share was quoting at Rs 183.30, up Rs 13.64.

Over the weekend, China signalled an end to the yuan's fixed rate against the dollar. The People's Bank of China said in a statement that the decision to end the yuan's peg was made after the world's third-largest economy improved.

The yuan's appreciation is positive for long-term aluminium and zinc prices. Globally, China produces around 40% of zinc. So, demand from China will increase due to cheaper imports. This will force Chinese producers to increase prices. International prices for zinc are expected to rise but costs will remain the same for Sterlite. This will lead to margin expansion with the same volume outlook for the company.