Vedanta to Tata Steel: Metal stocks tumble as tariffs cloud growth outlook

This comes a day after US President Donald Trump unleashed tariffs on all trading countries, even as analysts expect the risk of recession and inflation to rise in the US

Shares of metal firms witnessed heavy selling pressure on Friday, a day after US President Donald Trump's sweeping reciprocal tariffs reignited fears of global trade war.

 

The Nifty Metal index crashed 6.56 per cent, its steepest fall since June 4, 2024.

 

All 15 constituents of the index ended the session in red, with Hindustan Copper emerging as the biggest casualty, declining 9.13 per cent, while Hindalco Industries, National Aluminium Co (Nalco) and Tata Steel tumbled over 8 per cent. 

 

While analysts do not see a direct impact of the 25 per cent tariff on steel and aluminium on the Indian metals, they note that the second-order effect could have a major impact.

 

 

"Metals will be hit the most, followed by technology whose higher weight has a bigger market impact," strategists at Emkay Global said.

 

Metals - a significant contributor to Nifty earnings per share (EPS) for the financial year 2025–26 (FY26) -- now appears vulnerable due to the addition of new capacity and the potential impact of declining prices, according to Emkay.

 

“A global slowdown could negatively affect Hindalco, Vedanta and Nalco stock prices by 29 per cent, 34 per cent and 26 per cent, respectively,” Emkay said.

 

Likewise, it could affect steel equities – Tata Steel, JSW Steel, Jindal Steel and Power, and Steel Authority of India shares by 40 per cent, 36 per cent, 35 per cent and 43 per cent, respectively, it said.

 

Steel prices and margins typically follow global slowdown and expansionary phases, Emkay said.

 

"In our bear case, steel spreads could weaken 30-45 per cent based on the profitability in previous cycles."

 

JP Morgan reckoned that the full implementation of these policies as a substantial macro-economic shock, not currently incorporated in their forecasts.

 

"This shock will likely be magnified by its impact on sentiment and through the retaliation of countries facing significant increases in their tariff rates,” it said.

 

However, Geojit Financial Services maintained a ‘neutral’ rating on the metal sector, citing that the rise in steel prices, driven by demand resurgence, increased raw material costs, and policy shifts, is a positive development.

 

"The implementation of 12 per cent safeguard duties on certain steel imports, which is in the pipeline, will bring relief to domestic players,” it added.

 

Trump announced tariffs of at least 10 per cent on imports, with higher rates on countries that have the highest trade deficits with the US.

 

India was hit with a 26 per cent import tariff, with few sectors like pharmaceuticals and energy sectors being exempted. The reciprocal tariffs do not apply to Indian steel and aluminium exporters since a 25 per cent levy is already in place.