Metal stocks added some lustre on October 25 following news reports of China announcing stimulus measures such as additional sovereign debt issuance and an increased budget deficit ratio.
The BSE Metal Index gained 1.8 percent. Hindalco Industries Ltd and Jindal Steel and Power Ltd jumped 3 percent each, while Nalco gained 2.7 percent. SAIL, Tata Steel and NMDC climbed 2 percent each, while JSW Steel Ltd and Vedanta added 1.6 percent and 1.23 percent.
Beijing plans to issue 1 trillion yuan in government bonds to support the economy, with a focus on infrastructure and disaster relief. This news boosted construction and utility stocks in China. Analysts expect this government spending to aid economic stability and boost Q4 growth.
China, as one of the largest consumers of metals around the world, drives demand for metals with the economy gaining some strength. Stimulus measures like infrastructure projects positively impact metal prices and related companies, including those in India.
News on Central Huijin's purchase of local exchange-traded funds also lifted Chinese stocks, which have been struggling due to economic concerns and a property market downturn. However, these challenges still persist, analysts said.
News report said that China planning an increased budget deficit ratio. According to a Bloomberg report, the country infrequently amends its mid-year budget, with notable instances in 2008 after the Sichuan earthquake and the Asian financial crisis of the late 1990s.
Analysts are waiting for signals from the Federal Reserve, which will decide on interest rates next week. Recent data showed improved US business activity, giving the central bank more flexibility to maintain higher rates. Fed Chair Jerome Powell is expected to address this at the Moynihan Lecture in Washington, DC, reiterating the likelihood of at least one more rate hike this year.
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