Nifty Metal slides 4% amid West Asia conflict; analysts flag risks

Nifty Metal index movement today

Shares of both ferrous and non-ferrous metal companies came under heavy selling pressure on Monday, March 9, as escalating geopolitical tensions and rising crude oil prices weighed on investor sentiment. 

The Nifty Metal index dropped nearly 4 per cent to hit an intraday low of 11,516.65. By 01:10 PM, the index was trading at 11,635.30, down 3 per cent from its previous close of 12,000.45, making it one of the worst-performing sectoral indices of the day. 

In comparison, the benchmark NSE Nifty50 was trading at 23,850, down 597 points, or 2.43 per cent. 

Among individual stocks, Jindal Stainless plunged 4.5 per cent to ₹719.55. It was followed by Tata Steel (down 3.97 per cent at ₹190.59), Welspun Corp (3.9 per cent at ₹777.75), APL Apollo Tubes (3.85 per cent at ₹2,070) and JSW Steel (3.77 per cent at ₹1,187.20).  CATCH STOCK MARKET UPDATES TODAY LIVE 

 

Other metal stocks such as Jindal Steel and Power, Hindustan Copper, Adani Enterprises, Hindustan Zinc, Lloyds Metals and Energy, Hindalco Industries, Vedanta, and NMDC also fell up to 4 per cent each.

Why are metal stocks under pressure?

According to analysts, the broader weakness in metal stocks reflects the risk-off sentiment across global markets amid rising geopolitical tensions. 

Sunny Agrawal, head of fundamental research at SBI Securities, said the strengthening of the dollar index following the US-Iran conflict is one of the key factors weighing on global metal prices. The dollar index has moved up from around 97 to near the 99.5-100 levels, and this typically has an inverse correlation with metal prices globally, including precious metals. 

However, he also noted that supply disruptions in the Middle East are pushing aluminium prices higher. “The closure of a few aluminium processing facilities across Qatar and the Middle East has led to aluminium prices moving closer to lifetime highs, around $3,400 per tonne. That could be positive for aluminium producers such as NALCO and Vedanta,” Agrawal said. 

He also highlighted demand uncertainty as a key variable going forward. “The bigger question is whether the ongoing conflict continues for a prolonged period or remains limited to a few days or weeks. If it extends for longer, it could start affecting the global demand environment for metals and related products,” he added.  READ | LNG supply fears hit gas stocks; GAIL, Petronet LNG, Gujarat Gas tumble 5% 

G Chokkalingam, founder of Equinomics Research, said the weakness in metal stocks is largely linked to rising crude oil prices and the resulting inflation concerns. 

“Higher oil prices are inflationary and could push global inflation rates up. That, in turn, may slow economic growth. Since metals are highly sensitive to economic growth and infrastructure activity, concerns over weaker growth prospects are weighing on metal stocks,” he said. 

However, according to Kotak Institutional Equities, recent force majeure announcements by aluminium producers Hydro and Alba highlight the vulnerability of the Gulf’s aluminium supply chain amid the ongoing conflict. The GCC accounts for about 8-9 per cent of global aluminium production and exports roughly three-fourths of its output.  

Since smelters rely heavily on alumina and bauxite shipments through the Strait of Hormuz, disruptions could tighten supply and push global aluminium prices higher. The brokerage noted that Indian producers may be relatively better placed due to their largely domestic raw material and fuel sourcing, the brokerage said in a recent note.