Nifty Metal index slips 6%; Tata Steel, Vedanta, JSPL, NMDC fall up to 8%

Metal markets were roiled in selloff on concerns over Chinese steel production, global growth risks and the prospect of reduced US stimulus

Shares of metal companies came under pressure on Friday with the Nifty Metal index plunging 6 per cent in intra-day trade on Friday. Investors booked profits in the segment on concerns over Chinese steel production, faltering global growth, and the prospect of reduced US stimulus.

At 01:46 pm, Nifty Metal index, the top loser among sectoral indices, was down 4.8 per cent, after falling 5.6 per cent in the intra-day trade on the National Stock Exchange (NSE). In comparison, the benchmark Nifty50 index was down 0.72 per cent at 16,450 points.

Individually, Tata Steel, Vedanta, Jindal Steel & Power (JSPL), Vedanta, NMDC and Steel Authority of India (SAIL) dropped between 5 per cent and 8 per cent on the NSE.

However, despite the sharp correction in metal stocks today, 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. CLICK HERE FOR MORE DETAILS

Analysts at Edelweiss Securities perceive increase in interest rates, taper tantrums 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 risk, 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. We also perceive another Covid-19 wave impacting supply chain and demand. On the sector front, we see risks to spreads from raw material prices not falling in line with finished products prices owing to supply chain issues," the brokerage firm said in a August 2021 sector report.