Nifty Metal index crashes 16% in May, sees sharpest fall since March 2020

Fall comes on the back of the govt's decision to impose export duty on steel in a bid to cool off domestic prices

The Nifty Metal index crashed 16 per cent in May, its sharpest monthly fall since March 2020 when it sank nearly 30 per cent due to the demand shock created by the spread of covid-19 pandemic. 

This month’s fall comes on the back of the government's decision to impose export duty on steel in a bid to cool off domestic prices. 

The last week’s decision has led to a sharp selloff in metal stocks with analysts rushing to lower earnings growth and price targets. From this year’s peak of 6,775 on April 11, the Nifty Metal index is down 21 per cent. Globally, steel prices have softened since mid-April. 

This along with the imposition of export duty has led to a double whammy for domestic steel makers, who ship between 10 per cent and 30 per cent of their production. Strong global demand—which hinges on China revival—will help steel makers pass on the duty. 

Meanwhile, steel companies are hopeful that the imposition of export duty is a temporary measure like in 2008 when the duty was removed within a month on certain steel products.