BSE Metal Index surges 10% on expectations of rising demand, China relief measures
The BSE Metal Index surged 10% in August, amid expectations of a rise in demand in domestic markets going forward. Metal stocks such as NMDC, Coal India, Tata Steel, APL Apollo Tubes, Hindalco Industries, Steel Authority of India, and National Aluminum Co all saw significant gains.
The rally was driven by a number of factors, including:
Rising demand in the domestic market: Construction activity is starting earlier than anticipated, driven by a lacklustre monsoon in August 2023, and the pre-election infrastructure development ahead of the general elections.
China relief measures: The Chinese government has taken a number of measures to revive the economy, including easing the one-year loan prime rate and relaxing mortgage policies. This has boosted sentiment in metal markets, as analysts expect increased demand from China.
US Fed rate pause expectation: The recent US jobs report showed a cooling labour market, potentially pausing rate hikes by the Federal Reserve this month. This is positive for metal markets, as higher interest rates can make metals more expensive.
However, some analysts are cautious about the outlook for metal prices, citing the possibility of a recessionary environment in developed countries and a weakened Chinese economy. IDBI Capital expects steel companies to experience limited operating profit growth in FY24.
Overall, the outlook for the metal sector is positive in the near term, but there are some risks on the horizon. Investors should carefully monitor the global economic environment and the demand outlook for metals before making investment decisions.
Key takeaways:
The BSE Metal Index surged 10% in August, amid expectations of a rise in demand in domestic markets going forward.
The rally was driven by a number of factors, including rising demand in the domestic market, China relief measures, and the US Fed rate pause expectation.
However, some analysts are cautious about the outlook for metal prices, citing the possibility of a recessionary environment in developed countries and a weakened Chinese economy.
Overall, the outlook for the metal sector is positive in the near term, but there are some risks on the horizon
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