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Nifty Metal rose over 2 per cent in morning deals on Tuesday, September 24 after the Chinese central bank cut its short-term policy interest rates, along with announcing other support measures to support its bleagured real estate market.
The People's Bank of China (PBOC) lowered the 14-day reverse repo rate by 10 basis points to 1.85 per cent, after holding off on cuts for longer-term mortages.
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At around 10:33 AM, the Nifty Metal was up 2.39 per cent at 9,680.4. Among its constituents, 14 stocks advanced and only 1 declined.
Among them, National Aluminium Company and NMDC were the top gainers, both rising above 4 per cent each. Similarly, Steel Authority of India (SAIL), Vedanta, Tata Steel, and Hindustan Copper were up 3 per cent each. Jindal Steel and Power and Hindalco were up over 2 per cent each, while Jindal Stainless, Hindustan Zinc, JSW Steel and Welspun Corporation traded over 1 per cent higher.
"The metal and mining sector today has rallied after China announced packages to uplift the property sector’s sentiments. 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.
"The metal and mining sector today has rallied after China announced packages to uplift the property sector’s sentiments. 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, Asian stocks also hit a two-and-a-half year high. At last count, the Chinese blue-chip CSI300 Index was up 1 per cent, while the Shanghai Composite was up 2.38 per cent. Hong Kong's Hang Seng Index climbed over 3.28 per cent, while Japan's Nikkei was up 0.74 per cent.
However, Jhosna believes, the housing market in China has been struggling since the last four years and unless there is stabilisation in prices along with reduction in unsold inventories, any packages announced by the government would be insufficient.
On raw material supply side record inventories along with increase in output by some of the large global miners will continue to add pressure.
However, Jhosna believes, the housing market in China has been struggling since the last four years and unless there is stabilisation in prices along with reduction in unsold inventories, any packages announced by the government would be insufficient.
On raw material supply side record inventories along with increase in output by some of the large global miners will continue to add pressure.
PBOC rate cut
After the Federal Reserve cut interest rates by a massive 50 bps, the PBOC on Monday lowered its 14-day reverse repo rate by 10 bps to 1.85 per cent. PBOC Governor Pan Gongsheng, while making the announcement, said the PBOC would cut the 7-day repo rate by 0.2 percentage points.
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At a press conference, Governor Gongsheng hinted that China will be reducing the reserve requirement ratio by 50 bps soon. He also indicated that a 0.2-0.25 per cent reduction in the loan prime rate was also on the table. Last Friday, the PBOC had maintained its main benchmark lending rates at their current levels during the monthly fixing.
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