Nifty Metal index surges 3% in subdued market; Hindalco hits record high

Shares of metal companies rallied up to 6 per cent on the National Stock Exchange (NSE) in Monday's trade, in an otherwise subdued market, with the Nifty Metal index surging over 3 per cent as sanctions against Russia raised possibility of supply disruptions. This, in effect, will push up prices.

At 11:51 am, Nifty Metal index was the top gainer among sectoral indices and was up 3.5 per cent as compared to 0.11 per cent decline in the Nifty 50 index. Jindal Steel and Power, Tata Steel, Hindalco Industries and JSW Steel gained between 4 per cent and 5 per cent, while Steel Authority of India, National Aluminium Company, Vedanta and Hindustan Copper were up in the range of 2 per cent to 3 per cent.

Individually, shares of Hindalco Industries hit a new high of Rs 563.75, soaring 6 per cent on the NSE in the intra-day trade.The stoxk surpassed its previous high of Rs 553.85 touched on February 11, 2022.

London aluminium futures hit record high on Monday after Western countries ratcheted up sanctions on Russia for its invasion of Ukraine, including blocking some banks from the SWIFT global payments system, raising fears of supply disruptions, news agency Reuters reported.

Russia produces about 6 per cent of the world's aluminium and accounts for about 7 per cent of global nickel mine supplies. It is also a major producer of gas used to generate electricity, a key component of aluminium production.

Base metals have been on a roll for much of 2021, and 2022 got further impetus from Chinese Power led shutdowns and changing monetary policies globally. The latest triggers comes from Ukraine – Russian geo political tensions which has led to sharp volatility in most asset classes. Before this Russia-Ukraine crisis escalated, select metals were already seeing very strong fundamentals and there are possibilities of United States and its European allies to announce fresh sanctions against Russia.

"Sanctions on aluminium maker Rusal in 2018 drove the metal's price up 35 per cent in days. Used in stainless steel and batteries for electric vehicles, nickel is up an over 20 per cent this year having risen 25  per cent in 2021. Lower inventories in metals along with strong consistent demand has been already supporting the backdrop, and with the latest trigger, it looks like the metal has got some more feet to rally," said Navneet Damani, senior Vice President - Commodity & Currency Research at Motilal Oswal Financial Services.