Vedanta, Welspun, Hindustan Copper, other metal stocks surge up to 4%, Nifty Metal up 1.5%; here’s why

Metal stocks like Welspun, Vedanta, Hindustan Copper, SAIL, and Hindustan Zinc, among others gaining up to 4%, supported the sectoral benchmark Nifty Metal index during the trading session on Wednesday, September 23, as investors focused on copper prices hitting a fresh all-time high.

NSE data showed that the Nifty Metal index rose 1.5% to touch an intraday high of 13,184.40 points on Wednesday’s market, in comparison to 12,990.35 points at the previous equity market close.

As of the morning market hours, Nifty Metal was trading 1.2% higher at 13,166 points during the trading session on Sept. 23. Stocks like Steel Authority of India (SAIL), Welspun Corp., Vedanta, and others were leading the pack of gainers.

Why are metal stocks rising today?

Investors were primarily focused on the momentum from copper metal prices, which have successfully risen for the 7th consecutive trading session amid persistent demand and production and supply chain disruption scenario in the market.

With lower copper production in major exporting countries like Indonesia and DRC due to operational incidents, the total output declined, resulting in the creation of supply constraints in the market, which has been supporting prices.

Data showed that Copper futures in the US touched an all-time high of $6.92 per pound, rising around 4.6% in the last five market sessions.

Metal and mining companies or producers benefit from these elevated price levels, as the higher rate of the commodity directly results in margin gains, as the companies will be selling their production output at a higher price.

Higher prices in the global market benefit both the company's revenues and margins, which acts as a positive momentum trigger for the stocks with elevated buying interest among investors.

Along with the surging metal prices, the lower energy costs in the market also acted as a positive trigger for metal stocks, as the pullback in crude oil prices helps reduce the logistical costs of these heavy metal producers.

Oil prices declined to $97.93 per barrel (bbl) on Tuesday evening amid hopes of the United States potentially meeting with Iranian officials to discuss a peace deal with the help of Oman as a broker.

Metal stocks in focus today

Industry sentiment trigger

At the 60th AGM of the Federation of Indian Mineral Industries (FIMI), the Secretary of the Ministry of Mines, Keshav Chandra, announced that the central government will soon announce an incentive scheme to boost the domestic production of lithium and nickel.

This announcement also acts as a positive momentum trigger for the entire metals and mining sector as the central government looks forward to boosting the domestic productions amid the elevated global commodity prices.

“Very soon we will be launching our scheme for lithium and nickel,” said Keshav Chandra on Tuesday.

The central government’s move to boost domestic production of lithium and nickel aims to build a critical mineral value chain and, in turn, reduce the dependence on imports of these materials from foreign countries.

While the Mining Secretary raised concerns over the mining blocks which remain non-operational, the official also highlighted that four states, namely Gujarat, Maharashtra, Odisha, and Andhra Pradesh, have successfully prepared for critical mineral processing.