The US-China trade war has started showing its effect on the market, and it was evident with the falling stocks of metal companies on the opening day of this week. Nifty’s Metal Index recorded a decrease to up to 8.60 per cent, which is a record 52-week low. Out of the 15 stocks that are part of the metal index released by Nifty, five showed a 52-week decline. This includes Nalco, JSL, Hindalco, Hindustan Copper, and MNDC. The stocks of these major companies have crashed to a record 19 per cent amidst global pressures.
Lloyds’ metal share was reduced by 18.13 per cent, creating a slowdown in the market. Tata Steel’s share price also tanked to 126.35 rupees, while Hindustan copper was reduced by 10 per cent to 183.82. Companies like Vedanta, National Aluminium, Hindustan Zinc, and SAIL have plunged to 8 per cent, setting panic among investors.
The reasons for the fall in metal stock prices were shared by G Chokalinga, the founder and head of the research wing at Equinomics Research. He believes that there are three main reasons behind the fall. The first is the high tariff of 54 per cent imposed by the US on China, which holds a central position in the demand and supply of metals. Second is the economic slowdown in the international market due to deflationary pressures which has affected metals the most, only after oil. Third is China’s policy to dump steel in countries with low tariffs to ensure cheap exports because of being hit by the tariffs.
Jigar Patel, who is the senior manager at Anand Rathi says,
Going forward, support is anticipated around 7500, while resistance lies near 8000. A close above 8000 could trigger fresh buying, whereas a close below 7700 may open the door for a further decline towards 7500.
While the situation is not one that was unpredictable, the level of drop is beyond comprehension and has set a tone of tension in Dalal Street. Driven by fear of recession in the US, a global economic slowdown and foreign investor outflow the market has been the worst affected due to the uncertainty set in by reciprocal tariffs of the US.
