Metal stocks recorded massive losses on January 13 after strong US jobs data raised concerns over a delayed rate cut by the US Federal Reserve. The sectoral benchmark index Nifty Metal dropped around 4% or 312 points to close at 7,951.
The US Labor Department released its employment report on Friday, which showed an unexpected rise in US jobs in December. The unemployment rate also fell to 4.1%. This reinforced the view that the US Fed would keep interest rates unchanged for longer. Traders are now reportedly expecting the Federal Reserve to hold interest rates steady until at least June, compared to earlier bets on cuts as soon as May.
When US Federal Reserve cuts interest rates, more liquidity is generated in the market, which in turn boosts infrastructure for companies. Delayed rate cuts, therefore, directly affect metal stocks.
Shares of Hindustan Copper were the worst hit, falling as much as 7% to close at Rs 217.2 apiece on January 13. Tata Steel shares, a major constituent in Nifty Metal, dropped 3.34% to close at Rs 123.15 apiece. The other metal stocks which recorded strong losses included APL Apollo (6.39%), Steel Authority of India (5.55%), and others.
The US Federal Reserve had cut its key interest rates for the third straight meeting in December. The rates were lowered by 25 basis points to 4.25%-4.50% range. The central bank in September had made its first rate cut in more than four years, since the early days of the pandemic.
Brokerage firm Nomura in its latest note released on January 10 stated that it expects the shares of Jindal Steel & Power (JSP) to perform better than those of JSW Steel. It said JSP is "relatively better placed than peers", as it expects EBITDA to improve sequentially. The brokerage kept a 'Buy' rating for JSP with a target price of Rs 1,180. This implies an upside potential of 35% from the stock's closing price of Rs 873.4. For JSW Steel, the firm maintained a 'Buy' rating with a target price of 1,220. This implies an upside potential of 38% from the stock's closing price of Rs 883.15. Notably, JSP and JSW Steel shares have fallen 4.8% and 2% respectively on January 13.
The fall in metal stocks comes amid overall low market sentiment. The Sensex crashed over 1,000 points to close at 76,330 on January 13. Nifty dropped nearly 1.5% to end the day at 23,086. All sectoral indices closed in the red, with Nifty Realty recording the biggest fall of 6.47%.
Read more at Monday mayhem: Sensex nosedives 1,000 points, Nifty below 23,100; mid, smallcaps plunge over 4%
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