Vedanta, SAIL to Hindalco: Why are metal stocks under pressure today? EXPLAINED

Metal stocks underperformed on Thursday, June 19, as the Nifty Metal index declined 0.5 percent in an otherwise flat market, marking its third consecutive session of losses. Over this streak, the index has dropped nearly 2.7percent, losing momentum that followed a robust 7 percent rally in May. Analysts attribute this pullback to profit-taking, a firm U.S. dollar, and renewed international tensions, especially over Middle East uncertainties and stalled U.S.–China trade negotiations.

Profit-Taking After a Surge

After an impressive recovery last month, metal stocks saw investors locking in profits. The absence of a clear resolution in U.S.-China trade negotiations has dampened sentiment in commodities. 

Concerns over escalating conflict in the Middle East also added to market apprehension. As the situation entered its seventh day, U.S. President Donald Trump hinted at potential American involvement in military operations targeting Iranian nuclear facilities. This hawkish tone unsettled markets, lifting oil prices and exacerbating macroeconomic uncertainty. The uncertainty weighed particularly heavily on metal stocks, which are sensitive to rising energy costs and geopolitical risk.

Moreover, earlier this week, the U.S. Federal Reserve opted to maintain benchmark interest rates in the 4.25–4.50 percent range, rejecting pressure from President Trump for rate cuts. The decision, alongside dovish forward guidance on future monetary policy, bolstered the U.S. dollar. Against a stronger dollar, commodities priced in greenbacks—metals included—became relatively costlier, weighing on metal companies’ margins.

"Metal stocks are under pressure for two reasons: steady interest rates after the US Fed meeting and rising US dollar rates. The market was expecting a rate cut from the US Fed meeting as the US president continuously pressed for it. However, US Fed chief Jerome Powell didn't buckle under the pressure of the White House and decided to keep US Fed rates unchanged at 4.25% to 4.50%. This triggered buying in the US dollar, leading to a rise in the US dollar rates at FOREX Exchange. These two developments are expected to pressure the metal company's margins as their input cost will increase soon," said Avinash Gorakshkar, Head of Research at Profitmart Securities.

Stock-Specific Performance Dive

Within the Nifty Metal index's 15 constituents, Vedanta led the decline, dropping over 2%. Hindustan Zinc fell about 1%, while other heavyweights—Hind Copper, SAIL, APL Apollo, NALCO, NMDC, and Tata Steel—each slid more than 0.5%. These stocks felt the combined impact of profit-taking and margin concerns due to rising dollar-denominated raw material costs.

In contrast, some names found resilience amid the slump. Jindal Stainless, JSW Steel, Jindal Steel, Lloyd Steel & Engineering, and Adani Enterprises posted modest intraday gains, fueled by company-specific strength or better-than-expected earnings that offset broad-sector softness.

Going ahead, analysts pointed to widening input-output price spreads and reduced export competitiveness as primary headwinds. A strong dollar makes export revenues richer in dollar terms, but domestic purchases of imported steelmaking materials like coking coal, nickel, and ferroalloys become costlier, squeezing margins.

A prolonged dollar rally—if accompanied by rate hikes in the U.S.—could further dampen global metal demand, especially from markets like China dependent on dollar-priced commodities. Indian producers, who might control supply short-term, could face demand setbacks if global growth slows.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.