Why metal stocks are under selling pressure
Posted: Tue Aug 28, 2012 1:28 am
Metal and commodity socks were the biggest underperformers in trade Tuesday. The BSE metal index dropped 2.5 per cent, the most among all other groups of stocks on the BSE. The sharp selloff is a result of fears that the slowdown in China would further weigh down on commodity prices. China's industrial sector has posted a sharp decline in profit in July on weak demand.
Indian steel makers are reeling under selling pressure because Chinese steel prices have fallen the most in July 2012 on weak demand.
Private steel maker Jindal Steel and Power fell for a second straight day. It was the top Nifty loser, down 5 per cent. Tata Steel, India's largest steel company in the private sector was down nearly 2.6 per cent. Shares in state-run steel producer SAIL traded with over 1 per cent cut.
Brokerage firm Religare expects global steel prices to remain under pressure in the near term with no sign of production restraint from China.
"We remain cautious on the Indian steel sector as sluggish demand, a poor monsoon season and a decline in import CFR prices would further squeeze margins of steel producers in Q2FY13. For base metals, global news flow will drive the near-term direction of prices," Religare said in a note.
Among other commodity stocks, Vedanta group miners Sterlite Industries and Sesa Goa also came under sharp selling.
Sesa Goa, India's largest producer of iron ore slumped over 3 per cent. That's because iron ore prices continue to head south.
Aluminum maker Hindalco fell over 2.5 per cent after aluminium prices are at a 33-month low. Sterlite Industries, which produces copper and aluminum, dropped over 4 per cent.
The exceptions are Zinc and copper. Zinc prices have lost much less ground than other LME metals despite rising inventories. Copper prices have stabilized as supply disruptions keep the market tight, Religare said.
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Indian steel makers are reeling under selling pressure because Chinese steel prices have fallen the most in July 2012 on weak demand.
Private steel maker Jindal Steel and Power fell for a second straight day. It was the top Nifty loser, down 5 per cent. Tata Steel, India's largest steel company in the private sector was down nearly 2.6 per cent. Shares in state-run steel producer SAIL traded with over 1 per cent cut.
Brokerage firm Religare expects global steel prices to remain under pressure in the near term with no sign of production restraint from China.
"We remain cautious on the Indian steel sector as sluggish demand, a poor monsoon season and a decline in import CFR prices would further squeeze margins of steel producers in Q2FY13. For base metals, global news flow will drive the near-term direction of prices," Religare said in a note.
Among other commodity stocks, Vedanta group miners Sterlite Industries and Sesa Goa also came under sharp selling.
Sesa Goa, India's largest producer of iron ore slumped over 3 per cent. That's because iron ore prices continue to head south.
Aluminum maker Hindalco fell over 2.5 per cent after aluminium prices are at a 33-month low. Sterlite Industries, which produces copper and aluminum, dropped over 4 per cent.
The exceptions are Zinc and copper. Zinc prices have lost much less ground than other LME metals despite rising inventories. Copper prices have stabilized as supply disruptions keep the market tight, Religare said.
visit: Indian Stock Market Tips / Best Stock Market Tips