NALCO, Hindalco, other metal shares rise up to 4%; four reasons behind rally

White House press secretary Karoline Leavitt said that Trump will depart for Malaysia late on Friday night and will also visit Japan and South Korea, after addressing the Asia-Pacific Economic Cooperation (APEC) CEO Summit.

The expectations of cooling trade tensions between the two countries may have boosted the metal stocks.

Metal prices soar on supply concerns:

Aluminium prices on the London Metals Exchange (LME) crossed the $2,850 per tonne-mark today due to the tight supply and demand dynamics globally, and due to expectations of monetary easing around the world. Additionally, a smelter in Iceland is temporarily shutting down production following an equipment failure, which would likely affect production worth 100 kt. Copper prices also rose around 2 percent on LME today.

US Fed rate cut hopes:

The sharp rise also comes amid hopes for more rate cuts by the Federal Reserve. The American central bank is expected to lower the interest rate by a quarter point to 3.75-4 percent on October 29, according to a Reuters poll. The majority expect another cut in December.

More rate cuts by the US Federal Reserve are likely provide a boost to non-yielding assets. "The primary growth in metal prices have been driven by aluminium producers. With higher aluminium prices, the steel stocks have comparatively underperformed since steel prices have softened. The expected Fed rate cut and domestic demand is also helping improve quarterly performance," said Shravan Shetty, Managing Director at Primus Partners.

China's new five-year plan:

China has vowed to increase technological self-reliance and grow the domestic market in the next five years, as it looks to both insulate the economy from foreign pressures and build a sustainable engine for growth.

The country targets to "greatly increase" the capacity for self-reliance and strength in science and technology, according to a communique released on Thursday after a four-day conclave of the Communist Party’s Central Committee. It will also seek to maintain manufacturing’s share in the economy at a “reasonable” level as part of efforts to build a modern industrial system. These development may have also boosted investor sentiment for metal stocks.

Top metal gainers:

Hindalco Industries shares gained more than 4 percent, while National Aluminium Company (NALCO) and Hindustan Copper shares gained more than 3 percent each. Vedanta shares were up over 2 percent.

Earlier during the day, Hindalco shares hit a 52-week high of Rs 826.50 apiece. This comes after its subsidiary Novelis said that its fire-damaged plant in Oswego will restart by December-end, earlier than expected.

Hindustan Zinc shares gained around 1.4 percent, while Jindal Stainless Steel, Steel Authority of India (SAIL), Tata Steel and JSW Steel shares were trading in the green with marginal gains.

Bucking the trend, APL Apollo Tubes, Welspun Corp and Adani Enterprises shares were trading in the red.

"Metal stocks displayed notable resilience on a volatile market day, with the Nifty Metal Index touching a fresh record high of 10,457.40...The sector’s strength can be attributed to a confluence of supportive global and sector-specific developments. Aluminium prices surged to a multi-year high of around $2,860 per tonne on LME amid supply disruptions, following the temporary shutdown of a major smelter in Iceland, which is estimated to curtail production by nearly 100,000 tonnes due to equipment failure. This supply-side constraint, coupled with ongoing firmness in industrial metal demand, boosted sentiment across aluminium-linked counters," said Puneet Singhania, Director at Master Trust Group.

"Additionally, improved geopolitical tone ahead of the scheduled US-China trade discussions on October 30 in South Korea, along with growing market expectations of an upcoming US Federal Reserve rate cut, lent further support to the broader metal pack. In the near term, the outlook for metal stocks—particularly aluminium and copper-focused companies—remains constructive. We view any interim corrections as healthy and believe they present opportunities to accumulate quality names with long-term growth potential," he added.

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(With inputs from Reuters)

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