Hindalco, Tata steel, JSW Steel gain as Chinese central bank continues to push stimulus measures

Metal stocks were in focus on Monday with companies like NMDC, MOIL, JSW Steel, and Tata Steel trading in the green. The companies saw gains during the session on the back of China’s stimulus measures to revive the economy. Metal stocks are positioned to benefit from the resurgence in Chinese demand.

Starting last week, the People’s Bank of China announced a series of measures to provide growth stimulus to the economy and revive demand as concerns about a deflationary economy grew. The country’s economy has witnessed a contraction in demand and production over the past few years.

The effects of the COVID-19 pandemic resulted in households saving more and spending less, consequently drying up demand. Further, the wage growth in the country has been lackluster adding to demand concerns.

Moreover, the country faced a real estate crisis in 2021 which has negatively impacted property prices, manufacturing activity, and demand.

The trickle-down effects of various factors resulted in China’s central bank announcing a series of measures to support economic growth. The measures included cutting interest rates on existing mortgages, reduced reserve requirement ratios, and lower repo rates. China also eased regulations on buying homes in several cities.

The stimulus measures aimed to resuscitate demand and reduce borrowing costs have resulted in a rally in commodity prices, especially iron ore. Iron ore prices were up 11% on Monday.

As a result, domestic metal stocks that are poised to benefit from a growth in Chinese demand were trading higher on Monday. Over the past week prices of base metals such as copper, zinc, and lead have seen a rise as well.

Shares of NMDC were up 3.2% at ₹242.85 per share while MOIL’s shares saw gains of 1.5% and were trading at ₹405.75 per share. Shares of JSW Steel and Tata Steel saw gains of over 1.5% while Welspun Corp’s shares were up over 1% at ₹748.50 per share.