The shares of metal companies strongly surged on April 8, helped by reports of China considering further stimulus to support domestic demand, even as Trump's tariffs added to the uncertainty around global trade that had sent the Nifty Metal index lower for three sessions.
News reports have suggested that China may be discussing frontloading stimulus to counter US tariff levy, with a Bloomberg News report dated April 7 saying that Beijing is preparing a plan to defend its economic interests amid heightened trade uncertainties.
US President Trump had on April 2 introduced a slew of reciprocal tariffs on several nations, including 26 percent tariff on Indian imports, triggering an escalation in trade tensions, with countries threatening counter-measures. China said it will impose 34 percent tariff on US imports.
Global equity markets had crashed on April 7, as investors worried over a possible US recession and the implications of a trade war, with Metal stocks among the worst hit, and Nifty Metal crashing nearly 7 percent. However, the latest report on China's stimulus package and the decline in the strength of the US dollar has likely helped stocks stage a recovery. Nifty Metal closed over 1.5 percent higher at 7,965.60.
Lloyds Metals And Energy shares were the top gainer on the index, rising over 6 percent. JSW Steel and Adani Enterprises shares were up nearly 3 percent each. APL Apollo Tubes and Hindustan Copper shares also closed nearly 3 percent higher.
National Aluminum, Hindalco, Jindal Steel & Power, Jindal Stainless Steel and other stocks recorded gains over 1 percent.
Tata Steel shares closed in the green with marginal gains. This comes a day after the stock crashed 10 percent to briefly get locked in the lower circuit.
Other metal stocks which were trading in the green with marginal gains included NMDC, Vedanta and Steel Authority of India (SAIL).
Despite the positive momentum in the index, Welspun Corp shares closed nearly 3 percent lower at Rs 770 apiece.
PL Capital's latest note said that it sees opportunities to invest after the recent fall in share prices. "We believe the recent sharp fall in stocks makes valuations attractive and offers an opportunity to invest in companies having higher domestic exposure as domestic demand is expected to remain stable," the PL note said.
"...US tariffs and rationalization of Chinese steel capacities had led to increase in steel prices across regions. However, escalating trade tariffs have increased the risk of supply chain disruptions, high inflation, and slowdown of global economies which have affected commodity prices," PL Capital added.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services has said that the uncertainty and volatility may linger on for some more time. "There are some significant takeaways from the ongoing chaos. One, the trade war is like to be confined to US and China. Others including EU and Japan have opted for negotiations. India has already started negotiations on a BTA with US. Two, the risk of a recession in the US has increased. Three, China is likely to be the worst-hit economy," said Vijayakumar.
US President Trump’s threat of another 50 percent tariff on China, on top of the recently announced one threatens to 'freeze' Chinese exports to US. "China will try to dump its products like metals in other countries, and this will keep international metal prices depressed," Vijayakumar added.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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