Hindustan Zinc, NALCO to Vedanta: Nifty Metal index plunges 3.5% — What's behind the fall?

Metals faced intense selling pressure in Thursday's trade (January 8), with the Nifty Metal index plunging as much as 3.5% to 11,124.70 on the National Stock Exchange (NSE).

All 15 Nifty Metal constituents were in the red at the time of writing this report. Hindustan Zinc emerged as the worst-performing metal stock, losing over 6% to trade at ₹588.35, its lowest level since August 2024.

National Aluminium Company Limited (NALCO) and Hindustan Copper cracked 5% and 4.7%, respectively, while Vedanta shed over 3%.

The decline in these metal stocks coincided with a drop in base metal and silver prices, as the revenues, margins, and cash flows of these companies are closely tied to global commodity prices.

Copper and nickel prices fell over 2% as investors booked profits, extending a pullback from recent record highs. Elsewhere among Shanghai Futures Exchange base metals, aluminium lost 1.99%, zinc shed 1.40%, lead declined 1.75% and tin dropped 1.53%, data from Reuters showed.

Other top losers also included steel companies, including Jindal Steel, SAIL, and JSW Steel. Tata Steel lost the least among all metal stocks part of the Nifty Metal pack.

What's behind the fall in metal stocks today?

Analysts attribute stretched valuations and profit booking amid today's fall in metal stocks.

The recent softness seen across metal stocks should largely be read as profit booking linked to paper-market cooling, rather than a breakdown in the underlying commodity cycle, said Harshal Dasani, Business Head at INVAsset PMS.

He added that some short-term unwinding in metal stocks is natural, especially ahead of weekends and after steep commodity moves. "Commodity cycles rarely move in straight lines; they tend to rise sharply, pause briefly, and then resume—often with corrections that get bought back quickly."

The Nifty Metal index was among the top-performing indices on Dalal Street last year, with an over 20% rise.

Meanwhile, G. Chokkalingam, Founder, MD, and Head of Research at Equinomics Research, said that the reason for the slump in metal stocks is stretched valuations. He highlighted a trend that over the last 30 years, metals stocks, after a substantial run-up and hitting a 2–3 year high, invariably correct. "This happens because global capacities start improving."

Coming to valuations, the market veteran said that even if you assume that zinc and copper stocks triple their profits over the next two years, the P/E ratio would still be very high—above 20–25. Historically, industrial metals have traded at around 10–12 times earnings. But now, even on a one-year forward basis, industrial metals like copper are trading at more than 20–30 times P/E.

So, it is basically a function of the rally and stretched valuations, said Chokkalingam.

He also attributed the fresh tariff fears by US President Donald Trump on Russia, China and India, which he believes could weigh on global growth.

Republican Senator Lindsey Graham said Wednesday that US President Donald Trump has approved moving forward with a bipartisan sanctions bill aimed at countries that continue doing business with Russia.

“This bill will allow President Trump to punish those countries who buy cheap Russian oil, fueling Putin’s war machine,” Graham said, citing China, India and Brazil as potential targets of the legislation.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.