Weaker dollar, GST cuts, and expected steel production cuts in China are fueling investor optimism.
The Nifty Metal index extended gains into a third session, rising 3% in afternoon trade on Wednesday.
Steel stocks were the biggest gainers on the index with Tata Steel (+6%), Jindal Steel (+5.3%), and Steel Authority of India Ltd. (+5.1%) making up the top three.
Hindustan Copper (+4.6%), and Welspun Corp (+3.2%) rounded up the top five gainers.
Why are metal stocks gaining?
Weaker dollar: Since the dollar is used for trading commodities, a weaker dollar makes the purchase of raw materials cheaper for Indian steelmakers. It also increases demand for metals and helps Indian companies to create pricing opportunities.
Crucial GST meeting underway: A GST rate cut could spur consumption. Real estate demand could pick up due to reduced GST on housing and construction. This could lead to increased steel demand.
Steel production cut in China: China is expected to cut steel production between 2025 and 2026 to address overcapacity, according to reports. The move may reduce the dumping of cheap metal into India, offering relief to domestic players. CLSA noted that this could improve spreads and boost profitability for Indian steel mills.
Market Monitor
Retail sentiment for the Nifty Metal index on Stocktwits was ‘bullish’ after it gained 5.6% over the past three sessions. It was ‘neutral’ a week earlier.
The metal index has significantly outperformed all major indices in the last few sessions, including the benchmark Nifty 50 and Sensex.
At the time of writing, only Jindal Stainless was trading in the red on the Nifty Metal index.
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