Metal stocks were under pressure on Monday, with 12 out of 15 stocks in the Nifty Metal index hitting their respective 52-week lows in trade today.
The Nifty Metal index was among the worst-performing sectoral indices today, down as much as 4 percent in intra-day as compared to a 1.8 percent fall in the Nifty50 index.
The index has declined nearly 29 percent in the last 1 year and 24 percent so far this year. In comparison, the Nifty50 has lost nearly 5 percent in the last one year and 0.5 percent in 2019. In July, Nifty Metal index declined 16 percent against the 6 percent fall in Nifty.
The decline in metal stocks come after the US President Donald Trump declared he would slap 10 percent tariffs on $300 billion in Chinese imports, ending a month-long trade truce. China vowed on Friday to fight back.
The ongoing US-China trade tensions may lead to an increase in commodity prices which in turn will affect the metal space.
Weak quarterly earnings and growing demand worries also dampened investors' risk appetite for mining stocks.
“On the demand front, existing concerns regarding auto have been exacerbated by the seasonal weakness in construction," said Edelweiss Securities in a report.
“Ahead, we view challenges to profitability for all companies as raw-material costs remain robust primarily due to high iron-ore cost," the report added.
On Monday, Jindal Hisar hit its 52-week low of Rs 59.70 per share, down 7.3 percent while JSPL hit its 52-week low of Rs 111.75 per share, down 6.4 percent.
Hindustan Copper fell as much as 4.7 percent to its 52-week low of Rs 30.35 per share and Hindalco lost 5.2 percent to hit year low of Rs 171.60 per share.
Tata Steel declined 4.7 percent to a 52-week low of Rs 389.70, MOIL shed 3.4 percent to a 52-week low of Rs 130 per share, JSW Steel plunged 5.7 percent to a 52-week low of Rs 212.25, and NALCO slipped 3.4 percent to a year low of Rs 42.5.
Vedanta also lost 6.3 percent to hit year low of Rs 134.45, Hind Zinc was down 2.8 percent and Coal India fell 2 percent to hit a 52-week low of Rs 205.7 and Rs 193.1, respectively in intra-day deals.
Analysts continued to prefer structurally efficient companies with low capital and operating cost, with access to cheap raw material and a strong balance sheet.
Motilal Oswal prefers Hindalco and Jindal Hisar in the sector. It also likes JSPL, which should benefit from capacity addition and revival in the power sector. The brokerage maintained weightage in Hindalco and has incrementally added NMDC to its model portfolio.
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