Metal stocks performed very well today and the Nifty Metal Index gained almost 2%, bolstered by an increase in global investor sentiment and increasing possibilities of the US Federal Reserve making an interest rate cut. This increase in the index ends a rough November for Metal stocks but overall, the Metal stocks have performed well in the long term.
The rally mirrored optimism across the market, where all major NSE indices opened positively. Nifty Metal emerged as one of the top-performing indices for the day.
The index touched an intraday high of 10,260.45, reinforcing its strong rebound from the 52-week low of 7,690.20. It is now only 5% below its record high of 10,837.45 achieved in October last year.
Despite the near-term gain, the index remains down 3.4% in November, its steepest monthly drop in seven months.
Performance over broader timeframes remains robust, with gains of 15% over the past year, 10% in six months, and 10.5% over the past three months. Over the last five years, Nifty Metal has delivered returns of more than 250%.
All constituents of the index traded in the green during early trade. SAIL topped the leaderboard with a sharp 4.5% rise to Rs. 138.30, followed by JSW Steel, which advanced 3.4% to Rs. 1,149.35.
Hind Copper added nearly 3%, while Ratnamani Metals gained approximately 2.5%.
Heavyweights such as JSPL, Tata Steel, NMDC, NALCO, APL Apollo Tubes, Vedanta, Hindustan Zinc, and Hindalco also posted solid intraday gains of over 1%.
The index’s weakness this month can largely be attributed to the government’s extension of exemptions on certain steel and stainless-steel grades from mandatory quality control norms.
Analysts say this may allow more imports into India, which could pressure domestic prices and margins.
Additionally, a firm US Dollar Index holding above the 100 mark has weighed on global metal demand, as stronger dollar conditions typically dampen commodities priced in USD.
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As for the Steel segment, several brokers stated that it will be challenging during Q3. According to Axis Securities, steel spreads are projected to decrease 7% on a quarterly basis due to a lack of recovery in hot-rolled coil (HRC) prices. Currently, by the spot, HRC is down about 4% from last quarter.
Furthermore, for NMDC, Iron Ore prices were down about 5% compared to last year and 4% from the previous quarter. The cost of coking coal also went up about 3%. These factors combined create margins that are stretched due to lagged consumption of raw materials.
When asked about recommendations on Metal stocks, Axis Securities chose Hindalco and APL Apollo Tubes and projected an upside of Rs. 880 and Rs. 2,100 for both companies, respectively.