Metal stocks up on Sino-US trade truce; Jindal Steel, Hindalco top gainers

Shares of metal companies rallied in the morning deals on Monday after US and Chinese leaders brokered a truce in their trade conflict, a relief for the global economic outlook and a major boost for the emerging markets.

China and the United States agreed to halt additional tariffs in a deal that keeps their trade war from escalating as the two sides try again to bridge their differences with fresh talks aimed at reaching a deal within 90 days. 

The Nifty Metal index was the top sectoral gainer on NSE, with 14 constituents trading in the green and 1 in the red. 

Jindal Steel was leading the gainers table with 4.5 per cent rise, followed by Vedanta (3.6 per cent) and Hindalco (3.5 per cent). On a year-to-date basis, the Nifty Metal Index has lost nearly 20 per cent, as against 3.2 per cent rise in the Nifty50 index.

"Q2FY19 marked yet another quarter of earnings growth for ferrous stocks despite macro headwinds of trade brawls, China slowing down and strengthening dollar. Our top picks in the space: Tata Steel, Hindalco and JSW Steel, fared better compared to others," says Edelweiss Securities in a Q2 earnings review note. 

Going ahead, the brokerage expects ferrous spreads to decline from the current seven-year high levels due to decline in Chinese steel prices and elevated raw material prices. However, spreads are still expected to remain fairly benign. In non-ferrous, aluminium is expected to fare better than zinc on cost push and limited capacity additions world-wide.