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Home >Markets >Stock Markets >Markets slide on Fed minutes concerns, metals crash post China move

Markets continued to slide for a second day in a row on Thursday as the Federal Reserve hinted at considering tapering its asset purchase programs while metals crashed due to China’s action to restrict commodity prices. The BSE Sensex was down 337.78 points or 0.68% to 49,564.86. The Nifty slipped 124.10 points or 0.83% to 14,906.05.

Metal stocks witnessed heavy selling pressure after China’s move to curb commodity prices in the country, said Binod Modi, Head Strategy at Reliance Securities.

BSE Metals fell nearly 4% on Thursday snapping a dream rally for months now. The index has gained over 4% this month, driving its 60% surge in this year so far. Stocks like Steel Authority of India (SAIL), Tata Steel, Jindal Steel and Hindalco fell 4-5% on Thursday.

On Wednesday, China, the biggest consumer of metals, said it will strengthen its management of commodity supply and demand to curb "unreasonable" increases in prices and prevent them from being passed on to consumers, as it urged coal producers to boost output. China will step up adjustments on the trade and stockpiling of commodities and reinforce inspections on both the spot and futures markets. The country also urged coal producers to boost output to meet peak demand in summer. China’s coal production in April fell to its lowest since July 2020.

In Dalian, prices for steelmaking ingredient iron ore slumped as much as 7.5% after closing down 3.3% in the previous session. On the Shanghai Futures Exchange, steel rebar and hot-rolled coil dived around 6%, while base metals such as copper were also in the red.

“The recent developments in China aimed at reining in skyrocketing prices of steel/iron ore have caused a flutter in the ferrous market. Furthermore, a few market participants expect the government to ease production curtailments in Tangshan and Handan in order to push down domestic steel prices. As a result, domestic steel prices in China slid 8–10% in the past week. We expect near-term volatility in stock prices," said Edelweiss Securities.

Meanwhile, the minutes of the Federal Open Market Committee (FOMC) meeting on 27-28 April, that was released on Wednesday last night showed that A "number" of Fed officials appeared ready to consider changes to monetary policy based on a continued strong economic recovery.

“Global cues continued to remain weak over rising inflation concerns and divergent views of US Federal Reserve members over inflation as well as accommodative stance. Going ahead, the market is likely to continue with its consolidation till the inflation fear looms. Domestically too, though the fresh daily covid cases have started declining but the daily death numbers continue to be record high – thus worrying the market," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services..

According to Modi, minutes of FOMC meeting indicates diversions among members’ view about higher inflation and accommodative stance and European Central Bank (ECB’s) warning toward potential bubble in financial assets do not bode well for global equities including India. “This raises concerns about possible taper tantrum in early 2022, which is also expected to weigh on investors’ sentiments in coming week and can be a headwind for market," Modi added.

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