Hindalco, Nalco, Vedanta were among other metal stocks that declined in trade for the second straight session on February 25 amid rising uncertainties over tariffs and muted third quarter earnings for the current fiscal. The Nifty Metal index was down 1.2 percent, with 11 of its 15 constituents trading in the red.
Analysts believe volatility is expected to persist due to the combined effects of a shortened trading week and the derivatives expiry, which historically heighten market swings.
The index had closed with a sharp cut of 2.17 percent in Monday's trade. The profit-taking comes after the segment saw five straight session of rise between February 14 - 21, rising over 5 percent, on recent optimism around robust domestic demand and easing raw material costs.
The correction in the metal sector also reflects broader market caution, causing selling pressure in key constituents like Tata Steel, JSW Steel and Hindalco. Tata Steel management had recently remarked, "While domestic demand remains robust, global volatility and persistent cost pressures are testing resilience.
Krishna Appala, Sr. Research Analyst at Capitalmind Research noted globally, a strengthening U.S. dollar and indications from the Federal Reserve of fewer rate cuts in 2025 have pressured industrial metal prices, notably steel and copper.
"For India, heavily reliant on imported raw materials, the rupee's depreciation amplifies input costs, squeezing the margins for domestic metal firms. Muted Q3 FY25 earnings, elevated coal and iron ore prices. However, we view this correction as a short-term blip rather than a structural downturn," he added.
Hindalco Industries Limited was the top laggard in the segment, falling nearly 4 percent to an intraday low of Rs 617.30. Shares of National Aluminium Company fell 3.6 percent to an intraday low of Rs 182.70 per share. The stock has been falling for the last two days and is down 8.56 percent in the period.
Vedanta and Jindal Stainless fell up to 3 percent, tracking the wider losses among peers in the segment.
Karthick Jonagadla, smallcase Manager and Founder & CEO at Quantace Research listed factors behind sell-off in metal stocks:
US Tariffs & Retaliatory Risks: US tariffs threat for the imposition of a 25 percent tariff on all steel and aluminum imports has significantly weighed down sentiment domestically. The possibility of retaliatory tariffs on BRICS nations further adds to the negative sentiment.
Shift in Trade Routes & Oversupply Concerns: From April to November 2024, Chinese steel exports to India surged by 22.8 percent year-over-year. Analysts now project that up to 4 million tons per year—originally destined for the US market—could flood into India. This sudden oversupply is intensifying competitive pricing pressures, driving domestic steel prices lower.
Domestic Policy Awaited: Indian steel companies remain on edge as they await potential safeguard duties, with proposals ranging between 15–25 percent on Chinese steel imports.
What investors should do?
Karthick Jonagadla noted that option chain data suggests that key heavyweights in the Nifty Metal index are trading near sensitive levels: TATASTEEL: Rs 139, JSWSTEEL: Rs 970, HINDALCO: Rs 620, VEDL: Rs 440, ADANIENT: Rs 2280.
"Any breach in these levels could trigger further selling pressure, amplifying the move in Metals. These heavyweights make 70 percent of the weightage in the Metal Index," he added.
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