Adani Enterprises, Hindustan Zinc, National Aluminium, other metal stocks drag Nifty Metal down 2.5%; here’s why

Metal sector stocks like Adani Enterprises, Hindustan Zinc, and National Aluminium, among others, dragged the sectoral Nifty Metal index down 2.5% on Monday, August 31, as investors booked profits on decline in commodity prices after strong monthly gains amid elevated uncertainties in West Asia.

The broader equity market indices in India were facing downward pressure, with crude oil prices rising more than 6% on Monday as reports suggest Iran fired missiles on US targets located in Jordan.

NSE data showed that the sectoral benchmark Nifty Metal index declined 2.5% or 227 points intraday to a low of 13,187.40 points on Monday’s market, in comparison to 13,525.35 points at the previous equity market close.

As of the afternoon market session, Nifty Metal was trading 2.1% lower at 13,230.20 points, according to the exchange data.

Metal stocks have significantly outperformed the benchmark NIFTY50 index in the last one-month due to high commodity prices, supply disruption fears and falling inventory concerns in the global market.

With elevated metal prices in the market, companies gain due to the direct margin benefit which they enjoy by selling their production at a higher price.

Market experts predict that although metal production companies have shown strong performance in Q1 due to the margin gains, concerns remain over the near-term pressures in the market.

Investors were also monitoring the elevated US dollar rates in the global market, which in turn weigh down the demand for commodity metals amid the ongoing conflict, which has escalated into the first missile attacks in more than a month.

Investing.com data showed that the US dollar index surged to 99.71 on Monday’s currency market amid the latest round of attacks in West Asia between the United States and Iran.

Metal stocks in focus today

Metal prices today

Key metal prices of Steel, Copper, Aluminium, Zinc, among others have risen in recent times due to supply disruption fears and falling inventory concerns in the market.

Aluminium prices were trading 0.28% higher at $3,245 per 25 tonnes on Monday’s market, in comparison to $3,245.45 per 25 tonnes at the previous commodity market close, according to Investing.com data.

Copper futures prices were trading 0.23% lower at $14,253 per 25 tonnes during the trading session on August 31, in comparison to $14,253 per 25 tonnes at the previous market close, as per the exchange data.

On Monday, Zinc prices in the global market were down 0.46% at $3,857 per 25 metric tonnes, in comparison to $3,857 per 25 metric tonnes at the previous market close.

Nifty Metal up 4% in one month

Metal stocks gaining on NSE resulted in Nifty Metal delivering 4% returns to investors in the last one-month period. The sectoral index outperformed the benchmark NIFTY50, which has lost 1.4% in the same period.

Due to profit-booking pressure, the Nifty Metal index is trading 1.1% lower over the last five market sessions. However, in the longer-term period, the index has delivered strong returns to investors.

The exchange data showed that the Nifty Metal index has delivered more than 131% returns on its investment in the last five years, over 98% in the last three years, and more than 44% returns in the last one-year period.

Key focus of investors will remain on the government's policies along with the anti-dumping norms in India, but any pullback in global prices can impact company margins at a time when concerns loom due to higher input costs.