The shares of metal companies rose in trade on December 10 as investors increasingly expect the US Federal Reserve to announce a rate cut after the conclusion of its FOMC meeting later today.
A rate cut in the US could reduce borrowing costs for foreign investors, encouraging them to invest in higher growth markets in India. This boosts metal stocks.
The Nifty Metal index rose to 10,198.35, as seen at 11.15 am, snapping a two-day losing streak. It is currently the top gaining sectoral index on the market today.
Rising rate cut hopes:
Traders are now pricing in an approximately 89 percent chance of a 25-basis-point rate cut on Wednesday according to the CME's FedWatch Tool. Earlier in November, Fed Governor Christopher Waller said that the American job market is weak enough to warrant another quarter-point rate cut this year.
New York Fed President John Williams, a permanent voter on rate policy and vice chair of the rate-setting Federal Open Market Committee, also said that interest rates can fall "in the near term". "I view monetary policy as being modestly restrictive...Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral," Williams said.
Hopes for a rate cut this time were further solidified after data showed that consumer spending increased moderately in US towards the end of the third quarter. However, investors are still waiting for clues about future policy moves from what is expected to be the most divided Fed in years.
Investors are now reducing expectations of rate cuts in 2026 as skepticism around Kevin Hassett, the frontrunner to succeed current Fed Chair Jerome Powell, will prove to be as dovish as hoped by US President Donald Trump, continues to increase. Jerome Powell's eight-year term as Fed chair ends in May.
Silver hits lifetime highs:
Silver hit new all-time highs on December 10. Silver futures with March expiry rose around 1.5 percent to hit a fresh lifetime high of Rs 1,90,799 per kilogram. The future contracts with May expiry hit Rs 1,93,299 per kg for the first time ever.
Spot silver prices crossed $60 for the first time and continued to hover near $61 an ounce, marking a 32 percent jump in the last 24 hours.
"In recent sessions, the silver price has seen a new high, with industrial utilization of silver, global supply constraints, and investment demand representing the driving force behind this rally. Silver has outperformed gold, with increasing numbers of investors opting for silver," said Aksha Kamboj, Vice President, India Bullion & Jewellers Association (IBJA) and Executive Chairperson, Aspect Global Ventures.
What should investors do?
For investors, now is less about chasing quick rebounds and more about anchoring on balance sheets, capacity utilisation and long-term demand visibility in steel, aluminium and base-metals supply cycles, said Naren Agarwal, CEO, Wealth1.
"Indian metal companies are getting a strong breath of fresh air as a result of solid global base-metal prices and supply constraints in foreign countries," said Aman Gupta, Director, RPS Group. "It might be a chance for investors to take another look at the cyclical sectors that have been heavily impacted, and thus, should they time their moves well and be selective in picking stocks, they could benefit," he added.
"Metal stocks have gained over last year with niche metal stocks outperforming large players which are primarily in steel and aluminium. While the rupee devaluation helped, tariffs did impact margins," said Shravan Shetty, Managing Director at Primus Partners.
Top metal gainers today:
Hindustan Zinc shares were the top gainers on the index, rising around 5 percent as silver hit fresh lifetime highs amid rising hopes for a rate cut by the US Federal Reserve. Vedanta, Jindal Stainless Steel and Hindalco Industries shares gained nearly 2 percent each.Tata Steel, Jindal Steel & Power and Hindustan Copper shares gained around 1 percent each, while Welspun Corp, APL Apollo Tubes, Adani Enterprises and NMDC shares were trading in the green with marginal gains.
Bucking the trend, JSW Steel, Steel Authority of India (SAIL) and National Aluminium Company (NALCO) shares were trading in the red with marginal losses.
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(With inputs from Reuters)
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