Metal stocks rally on strong China Data, US rate cut hopes
Shares of metal companies surged Monday, leading gains in a session where benchmark indices hit lifetime highs. The Nifty Metal index also surged to a record, ending with near 4% gains on positive manufacturing data from China amid brightening prospects of a June start to the US rate easing cycle.
of metal companies surged Monday, leading gains in a session where indices hit lifetime highs. The Nifty Metal also surged to a record, ending with near 4% gains on positive manufacturing data from China amid brightening prospects of a June start to the US rate easing cycle.Shares of companies in this space ended 4-11% higher, with state-owned companies clocking in relatively higher gains. This outperformance was driven by them being relatively under-owned, said experts.
“The market perception towards PSU companies has changed, and they are believed to be cheaper. This along with the under-ownership is leading to a broad-based recovery,” said Aditya Welekar, analyst, Axis Securities.
Manufacturing activity in China grew at its fastest pace in 13 months in March, while an official factory survey showed that the manufacturing activity grew for the first time in six months.
This triggered a rally in shares of Indian metal producers, which were also supported by strength in the broader market ahead of the Reserve Bank of In dia’s policy meeting later this week, and earnings for the March quarter over the next few weeks.
“The structural concerns around China with regards to their sector remains, and this is reflecting in the steel in “their” country, which is not picking up,” Welekar of Axis Securities said.
China is the world’s largest producer and consumer of metals, and an ailing property market in the country has been weighing on the prices of metals globally as China has been exporting its surplus, especially steel.
Even though the demand for steel in India is strong, prices are also about 5-6% lower as compared to the start of the quarter, in line with the weakness in prices of HR coils in China. The March quarter is typically the strongest for steel-makers in terms of prices and demand.
“India has decent volume growth, and if steel imports from China fall, we will also be able to take price hikes,” said Tushar Chaudhari, analyst at Prabhudas Lilladher. He recommends being selective when buying shares as several companies have already seen a run-up.
He is positive on shares of , and . Welekar of Axis Securities, though, said that fresh buying at current levels is not recommended because there could only be a limited upside in shares without a change in fundamentals.
Manufacturing activity in China grew at its fastest pace in 13 months in March, while an official factory survey showed that the manufacturing activity grew for the first time in six months.
This triggered a rally in shares of Indian metal producers, which were also supported by strength in the broader market ahead of the Reserve Bank of In dia’s policy meeting later this week, and earnings for the March quarter over the next few weeks.
“The structural concerns around China with regards to their sector remains, and this is reflecting in the steel in “their” country, which is not picking up,” Welekar of Axis Securities said.
China is the world’s largest producer and consumer of metals, and an ailing property market in the country has been weighing on the prices of metals globally as China has been exporting its surplus, especially steel.
Even though the demand for steel in India is strong, prices are also about 5-6% lower as compared to the start of the quarter, in line with the weakness in prices of HR coils in China. The March quarter is typically the strongest for steel-makers in terms of prices and demand.
“India has decent volume growth, and if steel imports from China fall, we will also be able to take price hikes,” said Tushar Chaudhari, analyst at Prabhudas Lilladher. He recommends being selective when buying shares as several companies have already seen a run-up.
He is positive on shares of , and . Welekar of Axis Securities, though, said that fresh buying at current levels is not recommended because there could only be a limited upside in shares without a change in fundamentals.
Source: Stocks-Markets-Economic Times
