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Informist, Friday, Oct. 4, 2024

MUMBAI - Shares of metal companies are expected to continue to outperform as aggressive stimulus by China aimed at boosting its economy will likely keep stocks buoyed. The Nifty Metal closed 0.4% lower at 10113.20 points Friday, closing in the red for the second consecutive session. However, the metal index gained nearly 7% after China announced the stimulus, in hopes of recovery in global demand. The frothy valuations in the sector may limit upside, IDBI Capital said in a report today.

Metal companies have been on the rise after the government of China reduced the minimum down-payment ratio on second home purchases to 15% from 25% on Sept. 24. The move is aimed at reviving demand in China's real estate sector and will boost sales of empty homes. Further, the People's Bank of China trimmed its seven-day reverse repurchase rate and lowered the reserve requirement ratio for banks. This aimed at freeing up more resources for lending.

"(China's stimulus) will support prices given China accounts for (around) 50% of metal production and consumption globally," ICICI Direct said in a note. The pricing discipline, coupled with potentially lower imports and muted raw material costs scenario, especially on the power and coal side, is set to benefit Indian metal players.

The steel prices in China recovered by 2.2% on a monthly basis to $475 per tonne after these announcements, IDBI Capital report said. Meanwhile, steel prices in India decreased by 6.0% on month to INR 47,000 per tonne on the back of elevated imports, it added. The current weakness in steel prices could lead to margin compression and reduced realisations for Indian steel companies in Oct-Dec. Despite this, domestic demand is projected to grow by 8-10% this financial year and will support prices.

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anjali Singh
Edited by Vidhi Verma

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