Metals stocks glint in trade; Nifty Metal up over 1% on China stimulus

Metal stock surged after China lowered the mortgage rate. At around 9:28 AM, Nifty Metal was up 1.23 per cent at 10,188.3

The Nifty Metal index advanced over 1 per cent in the morning deals on Monday, September 30. The rally in metal stocks came after China's central bank, People's Bank of China (PBOC), announced, on Sunday, to lower mortgage rates for existing home loans before October 31.

At around 9:28 AM, the Nifty Metal index was up 1.23 per cent at 10,188.3. On the index, 14 stocks advanced and only 1 declined. Individually, NMDC was up nearly 4 per cent, and Welspun Corporation was up over 2 per cent. Similarly, Tata Steel, JSW Steel, SAIL, and Hindalco were up over 1 per cent.

Jindal Steel, Jindal Stainless, Adani Enterprises, Hindustan Copper, Ratnamani Metals, Nalco, Hindustan Zinc, and Vedanta were up in the range of 0.9 per cent to 0.38 per cent.

One stock that traded in the red on the Nifty Metal index was APL Apollo Tubes, which was down 0.07 per cent.

People's Bank of China (PBOC) has asked the commercial banks in China to reduce interest rates on existing mortgages at least 30 basis points (bps) below the Loan Prime Rate (LPR), in batches. It is anticipated that existing mortgage rates will be cut by around 50 bps on average.

After the Federal Reserve cut interest rates by a massive 50 bps, on September 24, the PBOC followed suit and lowered the 14-day reverse repo rate by 10 bps to 1.85 per cent.

At a press conference, PBOC Governor Pan Gongsheng hinted that China will be reducing the reserve requirement ratio by 50 bps soon. Governor Gongsheng also indicated that a 0.2-0.25 per cent reduction in the loan prime rate was also on the table. Before this, the PBOC maintained its main benchmark lending rates at their current levels during the monthly fixing.

"The Chinese government is expected to cut the outstanding mortgage rate, along with reducing the down payment on second home purchases, possibility to renegotiate/refinance the existing mortgages between banks and ramp up its re-lending program for state-owned firms to acquire unsold property inventories," said Parthiv Jhonsa, Lead Analyst (Metal & Mining), Anand Rathi Institutional Equities.

Jhonsa added: As seen in the past, though the rebound in metal prices is expected to continue in near term, they have fallen short of expectations.

Following the news, Asia-Pacific indices gained. At the last count, Hang Seng surged 3 per cent, Shanghai was up nearly 6 per cent and CSI 1000 was up over 8 per cent.