SHARES OF METAL FIRMS TUMBLE ON PROFIT BOOKING

BSE Metal falls 6.9%, NSE Metal 6.4% as benchmarks retreat for 2nd day

Shares of metal companies came under pressure on Friday, with the BSE Metal index plunging 6.9 per cent and the Nifty Metal index falling 6.43 per cent on Friday. The two were the worst performers among sectoral indices. This decline came as investors booked profits in the segment on concerns over Chinese steel production, faltering global growth, and the prospect of reduced US stimulus. A depreciating rupee, which slumped 15 paise against the US dollar, added to the woes.

Shares of metal companies came under pressure on Friday with the BSE Metal index plunging 6.9 per cent and the Nifty Metal index falling 6.43 per cent and on Friday. The two were the worst performers, while FMCG was the only gainer among sectoral indices as investors looked for safe havens.

The decline in metal stocks came as investors booked profits in the segment on concerns over Chinese steel production, faltering global growth, and the prospect of reduced US stimulus. A depreciating rupee, which slumped 15 paise against the US dollar, added to the woes.

On the day, the equity indices too spiralled lower for the second straight session, mirroring a global selloff as rising Delta cases and fears of earlier-than-expected tapering by the US Federal Reserve sparked a broad retreat from riskier assets.

The BSE Sensex slumped 300.17 points or 0.54 per cent to close at 55,329.32. Similarly, the broader NSE Nifty tumbled 118.35 points or 0.71 per cent to 16,450.50.

Among metal stocks on the NSE, shares of NMDC fell by 9.94 per cent, followed by Vedanta which fell 9.89 per cent, Tata Steel declined 8.85 per cent. Steel Authority of India (SAIL), Jindal Steel & Power (JSPL), and JSW Steel too declined over 7 per cent.

On the other hand, HUL, Asian Paints, Nestle India, Bajaj Finance, HDFC, HDFC Bank, Maruti and ITC finished in the green, climbing up to 5.37 per cent on the BSE. HUL’S market capitalisation crossed the ~6 trillion-mark as a result and closed at ~6,15,017 trillion on the BSE.

“Though the selling was broad-based, metal stocks were most affected due to a sharp plunge in iron ore futures across the world,” said Vinod Nair, Head of Research at Geojit Financial Services. However, despite the sharp correction in metal stocks on Friday, Tata Steel's market price has appreciated by 225 per cent in the past one year. SAIL, JSW Steel, Vedanta and Hindalco Industries, meanwhile, have rallied between 106 per cent and 191 per cent. In comparison, the S&P BSE Sensex was up 45 per cent during the same period.

“This week’s drop for iron ore accelerated, with futures sliding as much as 12 per cent to the lowest since December in Singapore on expectations that Chinese steel output and consumption will weaken over the rest of the year, partly as authorities curb pollution. Prices are more than 40 per cent below the record high level reached just three months ago", a

Bloomberg report said.

Analysts at Edelweiss Securities perceive increase in interest rates, taper tantrum in the US, and concerns around inflation as key macro risks for the metal and mining sector. Further, the policy uncertainty in China continues to be a key concern, they say, as the recent conflicting

statements on production cuts have confused the Street. “That said, we believe policies do not change or get implemented overnight. We perceive the uncertainties more as roadblocks than bottlenecks and remain optimistic on China's long-term goal to reduce its carbon footprint.,” the brokerage said in a recent sector report.