Metal stocks shine brighter as equities gain on easing US inflation, weak dollar

Cheaper imports from China remain a concern, impacting prices amid disappointing re-openings and unanticipated high Chinese exports

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Metal stocks got an extra shine in sync with the equity market, which rallied on a decline in dollar pushed by easing retail inflation in the US.

Hindalco Industries jumped over 4 percent, NALCO 2.2 percent, Tata Steel 2 percent,  JSW Steel 1.6 percent, Vedanta 1.3 percent, and Coal India 1 percent. The BSE Metal Index gained 1.6 percent, while the benchmark Sensex added 0.9 percent around 11.20am on November 15.

US consumer price inflation remained unchanged in October, defying the anticipation of a 0.1 percent rise, while the Fed’s closely tracked super-core CPI came in at 0.22 percent to a three-month low from 0.61 percent in September.

Nomura has shifted the US recession forecast to 3Q24, suggesting a supportive 'soft-landing' in 1Q24 for stocks. However, geopolitical tension, rising oil prices, and the Fed's potential return to a hawkish tone pose key risks to Nomura's perspective.

So far, metal companies reported better-than-expected September quarter earnings. While Tata Steel met analyst estimates, JSW Steel surpassed it riding on lower input costs, particularly coking coal. Tata Steel's higher net profit was a result of reduced tax outgo. Jindal Steel and Power's revenue and EBITDA matched estimates, with net profit surpassing the projection due to lower finance and depreciation expenses.

Analysts said that despite coking coal costs rising to over $350 a tonne in the quarter, the adverse impact will likely occur in 3QFY24. Strong domestic demand persists, driven by sectors like automobiles, industrial construction, infrastructure, and commercial real estate. Tata Steel's EU operations face ongoing challenges and are anticipated to encounter further difficulties ahead, analysts said.

"The performance in Q2FY24 in terms of revenue growth and operating margins were majorly in-line with the consensus estimates mainly due to falling coking coal prices as well as stable steel prices," Yes Securities said in its latest note.

Strong domestic demand has sustained Indian steel prices, benefiting local producers. Cheaper imports from China, however, remained a concern, impacting prices amid disappointing re-openings and unanticipated high Chinese exports. Analysts maintain a positive long-term outlook for the Indian steel sector, yet caution is advised because of current short-term challenges faced by steel producers.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.