Rare Earth Stocks - New Must-Have Watchlist

On 4th April 2025, China imposed export controls on seven rare earth elements (REEs) and rare earth magnets, requiring special export licenses.

This move was primarily a retaliation to US tariffs, which were as high as 145%. It halted shipments from Chinese ports, severely impacting US industries such as defence, electric vehicles and medical technology.

The US relies heavily on China for rare earth elements, with over 50% of its critical minerals sourced from there.

So, before the recent trade deal between the two countries, China's rare earth export restrictions threatened US defence (F-35 jets, missiles), technology (smartphones, AI chips), and healthcare sectors (MRI machines, cancer treatments).

So, even as the world's most powerful economies wrestle to find their stronghold in rare earths, India must secure its own resources to ensure the success of Make in India plans.

The rare earth resources in India are reported to be the fifth largest in the world.

Indian rare earth resource is significantly lean in terms of grade, and it is tied with radioactivity, making the extraction long, complex and expensive.

Moreover, in the case of rare earth minerals, an exhaustive ecosystem is required to move from reserves to finished products.

So, India still has a long way to go in terms of competing globally as a rare earth minerals resource centre.

Having said that, the Indian rare earth mineral sector is seeing traction fuelled by new government regulations.

To reduce import dependence and build a self-reliant ecosystem, the National Critical Mineral Mission (NCMM) was launched in early 2025.

This mission aims to boost domestic exploration and production of rare earth minerals.

It offers financial incentives, such as reimbursing 50% of exploration costs if no minerals are found, to de-risk investments. Plus, it facilitates the recovery of critical minerals from secondary sources like e-waste and industrial by-products.

While the rare earth sector is still nascent in India compared to established players globally, the new regulatory landscape and the strategic moves signal a promising growth trajectory.

In a significant move to kick start exploration, the government recently auctioned 13 exploration license blocks for critical minerals, including rare earths, zinc, diamond, and copper.

This marks a departure from the historical dominance of state-owned entities in mineral exploration and opens doors for private players and advanced technologies.

Several major Indian mining companies are strategically positioning themselves to capitalize on these new regulations and the increasing focus on rare earth minerals.

Stocks of key Indian mining companies such as Coal India, National Mineral Development Corporation (NMDC), and MOIL could rise as they tap into these opportunities.

#1 Coal India

One of the world's largest coal producers, it has begun to explore opportunities in critical minerals.

With its extensive land holdings and existing infrastructure, the company is well-placed to diversify into exploration and extraction of rare earths found in association with coal deposits or in new dedicated sites.

#2 National Mineral Development Corporation (NMDC) is India's largest iron ore producer, NMDC, has a long history of exploring various minerals.

The company has already signed a MoU with Indian Rare Earths Ltd and Andhra Pradesh Mineral Development Corporation for a joint venture focused on beach sand minerals, which are a source of some heavy rare earths.

NMDC has also been exploring lithium reserves in Australia, indicating its broader interest in the critical mineral space.

With the new policy framework, NMDC is expected to intensify its efforts in identifying and developing domestic rare earth resources.

#3 MOIL (Manganese Ore (India) is India's largest manganese ore producer, MOIL is also exploring opportunities in other minerals.

The company has engaged in discussions with West Bengal Mineral Development and Trading Corporation Limited to explore manganese and other mineral development possibilities.

Can rare earth mineral stocks fetch high returns?

Economists Ken Rogoff and Carmen Reinhart showed in their book This Time Is Different, the best indicator that a country will default on its debt is not the level of debt or economic growth. Rather it's the track record of its past default.

The same idea works for industries. Mining businesses have a brutal combination of demand uncertainty and capital intensity. Stocks like Coal India and MOIL are known to be excellent in terms of dividend yielding stocks.

But apart from the dividends the returns from the stocks could be volatile even over a longer time frame depending on geopolitical uncertainties, fluctuating demand, and government policies.

So, the top mining stocks in India could soon become 'rare earth stocks' and could find themselves in every super investor portfolio.

They should be on the watchlist of investors closely tracking India's progress in domestic manufacturing and technology.

However, be prepared to see some volatility in these stocks.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)