Nifty Metal index dips 3%; Jindal Steel, Tata Steel, SAIL down over 5%

In the past two months, Nifty Metal index has tanked 9 per cent against 1 per cent fall in the Nifty 50 index.

Shares of metal companies, mainly steel, were under pressure on Monday, with Nifty Metal index slipping nearly 3 per cent on the National Stock Exchange (NSE) amid trade tension and weak data from China.

Jindal Steel and Power (JSPL), Steel Authority of India (SAIL), Tata Steel, JSW Steel and Vedanta were down in the range of 3 to 6 per cent on the NSE.

At 02:49 pm, Nifty Metal index, the largest loser among sectoral indices, was down 2.9 per cent, as compared to 1 per cent decline in the benchmark Nifty 50 index. In past two months, Nifty Metal index has tanked 9 per cent against 1 per cent fall in the benchmark index.

Base metals remained under pressure since the start of June, as US-China trade tensions weigh on sentiment. China is the world’s biggest metals consumer.

“Steel demand growth continued to decelerate marginally for the second consecutive month in May’19 as compared to strong growth in the previous 3 months (Jan-Mar’19 average 8.8 per cent YoY – seasonally strong period) due to some drag from weakness in the automotive segment and possible slowdown in construction due to the waning effect during the election period,” analysts at SBICAP Securities said in sector update.

Global steel prices have declined by $10-15/tn due to rising trade war concerns despite the iron ore cost push; however, domestic steel players have raised prices for Jun’19 to pass on higher raw material cost (after the hike in domestic iron ore prices), it said.

Among individual stocks, Tata Steel dipped 6 per cent to Rs 473 on the back of heavy volumes. The trading volumes nearly doubled with a combined 10.52 million shares changing hands on the counter on the NSE and BSE so far.

“The cancellation of the proposed European JV had raised concerns that Indian operations would have to support the European entity in the near future thus hampering the domestic capex and deleveraging plans. However post the resumption of operations of Blast Furnace 5 at Port Talbot in January'2019 and completion of life extension program; we expect the European operations to be largely self sustaining,” analysts at Antique Stock Broking said in company update note.

Domestic steel demand is expected to maintain a steady growth rate of 7-7.5 per cent in CY19e/ CY20e aided by the continued thrust of the government towards infrastructure spending. Chinese HRC export prices are expected to stabilize at current levels of around $500-515/ton supported by firm coking coal and iron ore costs, the analysts said.