Nifty Metal index bounces back 3.4% from day’s low amid strong spike in metal prices
Heightened tensions in the Middle East lead to a decline in Indian equity markets, while metal stocks show resilience with a marginal gain. Fresh sanctions on Russian metals by the US and UK further contribute to the upward trajectory of metal prices in global markets.
The Indian market started off Monday's trade in negative territory as heightened geopolitical tensions in the Middle East, sparked by an Iranian drone attack on Israel in retaliation over the weekend, impacted investor sentiment.
According to media reports, more than 300 missiles and drones were fired by Iran at the weekend, the first time it has struck Israel from its soil, though many were intercepted with the help of Israel’s allies, including the US. The attack was in retaliation for a strike in Syria that killed top Iranian military officers.
The recent escalation of tensions has increased market volatility across Asia, with major indices experiencing declines in morning trade. By 11:00 a.m., both the Nifty 50 and Sensex had decreased by approximately 0.5% and 0.6%, respectively.
Stellar rebound
Amidst an overall market downturn, the Nifty Metal index has emerged as a standout performer, representing the only sectoral index trading in positive territory today.
At the start of the session, the Nifty Metal index experienced a decline of 2.3%, reaching an intraday low of 8,744 points. However, within the subsequent hours of trading, the index rebounded sharply, currently showing a gain of 0.95% at 9,041 points. From the day's low, the index has recovered by almost 3.40%.
In recent weeks, metal stocks have been steadily climbing due to a robust rally in metal prices, including copper, zinc, lead, steel, and aluminum. This surge is attributed to the resurgence in global manufacturing activities.
Further, the upward momentum in metal stocks is anticipated to persist in light of the recent imposition of sanctions on Russian metals by the US and UK. These measures are aimed at restricting the financial resources accessible to Russian President Vladimir Putin for military operations.
The sanctions prohibit the London Metal Exchange, where global benchmark prices are set, as well as the Chicago Mercantile Exchange, from accepting fresh supplies coming from Russia.
These restrictions, reported by Bloomberg, include copper, nickel, and aluminum produced on or after April 13. Additionally, the US has imposed a ban on Russian imports of these three metals. Notably, palladium and titanium, metals for which Russia is a major supplier, have been excluded from these restrictions.
Following this development, aluminum futures surged nearly 10% to above $2,700 per tonne in today's morning trade, while the copper futures have also jumped as much as 3.2%.
Russia is a major producer of the three metals, accounting for about 6% of global nickel production, 5% of aluminum, and 4% of copper. However, Russia is an even larger source of supplies on the LME.
At the end of March, Russian metal accounted for 36% of the nickel in LME warehouses, 62% of the copper, and 91% of the aluminum, Bloomberg reported, citing the available data.
The report pointed out that this move will be a blow to major miners MMC Norilsk Nickel PJSC and United Co. Rusal International PJSC, which have so far avoided Western sanctions since the war started.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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