Nifty Metal index hits over 3-year low as US-China trade war escalates

Shares of metal companies were under pressure on Monday with Nifty Metal index hitting an over 3-year low in the intra-day trade amid US-China trade war concerns.

At 10:07 am, the Nifty Metal index, the biggest loser among sectoral indices, was down 4 per cent at 2,185 level, as compared to a 0.53 per cent decline in the benchmark Nifty50 index. The index hit an intra-day low of 2,180, its lowest level since June 29, 2016 on the National Stock Exchange (NSE).

Among individual stocks, Tata Steel, Vedanta and JSW Steel slipped more than 5 per cent each, and were trading at their multi-year lows. Shares of Steel Authority of India (SAIL), Hindalco Industries, Jindal Steel and Power (JSPL), NMDC and Coal India, however, were down in the range of 2 per cent to 5 per cent on the NSE.

US President Donald Trump, on Friday, announced he would hike existing tariffs, applied to about $250 billion in Chinese goods, to 30 per cent from 25 per cent as of October 1. He also said a new round of tariffs on $300 billion in goods will be taxed at 15 per cent, up from 10 per cent.

Further, MSCI Hong Kong cut to underweight from overweight on concern that ongoing political tensions in Hong Kong will affect the city’s economy and corporate earnings, a Bloomberg report said citing a research note from Nomura.

Meanwhile, between April and July 2019-20 (FY20), domestic demand growth for steel was at 5.7 per cent year-on-year (YoY), much lower than FY19 growth of 7.5 per cent.

"This steel demand growth print now reflects contraction in end-user sectors like automobile sales and slowdown in infrastructure spending, as highlighted by steel companies’ commentary. Given the seasonal weakness in demand during the monsoon and subdued global steel prices, domestic flat steel prices have declined by a significant Rs 2,000-2,500/tn (or 5-6 per cent) since the start of July’19 and a more steep Rs 2,750-3,000/tn (6-7 per cent) in the case of rebar prices," analysts at SBICAP Securities said in metal and mining sector report for the month of July.

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