Base metals comprising commodities such as copper, tin, zinc, iron and steel are facing headwinds in many ways, causing a drop in the share prices of companies over the past few weeks. The political uncertainty triggered by mid-term polls announced by UK prime minister Theresa May and the upcoming elections in France have dampened the mood further, according to an analyst.
In India, the NSE Nifty Metal representing Coal India, Vedanta, JSW Steel, Hindalco, Tata Steel, Hindustan Zind, Manganese Ore and other stocks was down 7.23 percent on Wednesday over a 30-day period at around 3.15 pm. On the BSE, National Aluminium was the top loser at 7.56 percent on the BSE Metals index, followed by Jindal Steel (down 5.26 percent).
The fall in the share price of National Aluminium Co. (Nalco) was also attributed to the OFS. The government is selling 5 percent stake (~9.66 crore shares) in the company and had fixed a floor price of Rs 67. Currently, the Indian government owns 74.58 percent in Nalco.
"Base metals are currently facing a lot of heat, all thanks to the uncertain global environment and drop in Steel prices. Ambiguity in the global markets has refused to die ever since the Syrian gas attack on April 4, 2017. In condemnation of the same, the US carried out a military strike on Syrian airbase," Kaynat Chainwala (Research Analyst- Base Metals, Angel Commodities Broking) said in her note, titled "Global ambiguity sizzles; Base metals' rally fizzles".
"Besides, the US sent an aircraft carrier strike group to the Korean Peninsula region to warn it against conducting missile test," she added.
China ramping its steel production to a record 72 million tonnes last month dampened prices, "setting the lower benchmark for other base metals, especially nickel and zinc," according to her.
The outlook for the metals is bleak, given the political scenario in Europe. "Overall, the climate is not so good for risky assets at the moment and investors are likely to seek safe haven in the coming weeks as well considering the upcoming French elections and shocker snap election demand by UK's PM Theresa May," Chainwala said.
The BSE Sensex gained 17 points to end Wednesday trading at 29,336. Stocks that hit new 52-week high during the day included Hathway Cable, Jain Irrigation, India Cements, Sun TV Network and CESC.
Tata Steel shares ended 0.77 percent higher at Rs 454 apiece, JSW Steel at Rs 190 (up 1.71 percent), Vedanta at Rs 237 (up 2.67 percent) and Hindalco at Rs 187 (up 1.58 percent).
