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Informist, Friday, Sep 13, 2024

MUMBAI – Shares of metal companies are expected to extend their gains next week ahead of the interest rate outcome of the US Federal Open Market Committee's meeting on Wednesday. Rising prices of base metals on the London Metal Exchange and China's plans to cut rates on mortgages will also provide support for these stocks, analysts said.

Shares of metal companies were among the major gainers this week after a Reuters report late Wednesday, citing finance ministry sources, said India will impose tariffs between 12% and 30% on some steel products imported from China and Vietnam to safeguard and boost local industry. 

Due to high supply from China and the ongoing monsoon season, domestic steel companies have reduced their prices sharply in the last two months, the analyst said. However, we are expecting steel prices to rise from mid-October owing to the festival season demand and as the monsoon will likely come to an end, the analyst added. Despite these concerns, the valuations of metal stocks are very expensive, and they should correct by at least 5-10% from the current levels for an ideal entry point, the analyst said. 

Further, Bloomberg reported that China will likely cut rates on $5 trln worth of mortgages as soon as September. "The proposed cuts will likely come in two steps totalling about 80 basis points, people familiar with the matter said," Bloomberg reported on Thursday. This has led to sharp gains in metal stocks today and Thursday. 

However, the gains in metal stocks due to this development in China are just a knee-jerk reaction as they already have an oversupply of empty real estate properties, which will limit the construction of new ones, Narender Singh, a smallcase fund manager and founder of Growth Investing, said. 

The Nifty Metal index is expected to rise more in the upcoming week, according to analysts. The Nifty Metal index ended 0.9% higher at 9370.65 points. The index is expected to rise further if it breaks out of its immediate resistance at 9500 points, said Shiju Koothupalakkal, technical and derivatives analyst at Prabhudas Lilladher. The support for the index is pegged at 25250 points. 

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* Shyam Metalics Aug carbon steel sales up 25% on year at 142,104 tn

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Noel John

Edited by Vidhi Verma

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