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Commodity sell-off: Edelweiss's Amit Dixit says underlying prices may consolidate a bit

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Commodity prices saw a sharp decline in the New York session on Thursday, with many commodities wiping off all the gains of 2021, and some on the verge of doing so. Overnight, copper, zinc, aluminium, nickel slipped as much as 4 percent. Gold lost over 2 percent on Thursday, and 5 percent this week. Palladium got a major shock on Thursday, tumbling over 10 percent and Platinum lost 5 percent. Silver prices also slipped over 5 percent overnight.

Commodity prices saw a sharp decline in the New York session on Thursday, with many commodities wiping off all the gains of 2021, and some on the verge of doing so.
Overnight, copper, zinc, aluminium, nickel slipped as much as 4 percent. Gold lost over 2 percent on Thursday, and 5 percent this week. Palladium got a major shock on Thursday, tumbling over 10 percent and Platinum lost 5 percent. Silver prices also slipped over 5 percent overnight.
While both global and Indian equity markets are adjusting to the overnight sell-off, some buying was seen in Asia, as base metal prices rose 0.5 percent on Friday.
Explaining the overnight sell-off, Amit Dixit, Research Analyst of Edelweiss Institutional Equities said: “The real issue that commodities and stock prices are facing at the moment is the macro headwinds. There are two macro headwinds we can see: the first one is the uncertainty regarding the Chinese policies and the second one is the possibility of taper tantrums.”
US Federal Reserve on Wednesday signalled they expect interest rates to rise by the end of 2023 — sooner than they earlier expected. The statement came on the backs of recovering the US economy and rising inflation readings. While Fed Chair Jerome Powell hinted at a possibility of tapering with Fed's asset purchases, he did not give timings of such a move.
"Though it is still very premature to say taper tantrums, the indications are very clear. So these are the two macros that we see essentially,” Dixit added.
Speaking of the micro scenario, he said, "The next quarter (from July-September) is seasonally weak in terms of demand in many parts of the world. So, prices will go downward from here."
Until there is clarity on Chinese policies, stability in the dollar index at a level, and global economic recovery, there are a lot of headwinds in the market, in general, Dixit added. If the dollar index stabilizes at 93 or close, metal stocks will find their bottom, and start heading up again, because then "earnings will take over," Dixit said.
Dollar index impacts base metals more than steel, he said. "As far as steel is concerned, we are clearly on a little bit more sticky wicket at the moment," he added.
For full interview, watch the accompanying video.

Market Movers

CompanyPriceChng%Chng
Titan Company1,846.40 74.85 4.23
Sun Pharma793.75 18.75 2.42
Asian Paints3,036.35 62.30 2.09
Britannia3,557.85 53.20 1.52
ITC210.30 3.00 1.45
CompanyPriceChng%Chng
Titan Company1,846.15 75.90 4.29
Sun Pharma793.50 19.05 2.46
Asian Paints3,037.15 66.25 2.23
ITC210.30 3.05 1.47
TCS3,259.15 41.25 1.28
CompanyPriceChng%Chng
JSW Steel732.00 -14.70 -1.97
Grasim1,565.15 -26.50 -1.66
Hindalco441.10 -4.70 -1.05
Tata Steel1,398.85 -11.20 -0.79
UPL784.30 -6.75 -0.85
CompanyPriceChng%Chng
Tata Steel1,398.55 -11.40 -0.81
Bajaj Auto3,823.00 -17.65 -0.46
HCL Tech1,032.40 -2.85 -0.28
NTPC117.55 -0.25 -0.21
ICICI Bank680.25 -1.30 -0.19

Currency

CompanyPriceChng%Chng
Dollar-Rupee74.3000-0.0400-0.05
Euro-Rupee88.25400.01800.02
Pound-Rupee103.26200.05100.05
Rupee-100 Yen0.68050.00060.09