Nifty Metal Hits Nearly Two-Month High As Tata Steel, Vedanta, NMDC Gain

The Nifty Metal rose to hit a nearly two-month high on Tuesday, as risk appetite for metal stocks improved after China's central bank announced a slew of measures to boost the world's second largest economy. The market-cap of these companies rose Rs 36,168.53 crore to Rs 17.94 lakh crore as of 10:40 a.m.

The People's Bank of China reduced the reserve requirement ratio by 50 basis points, and cut the seven-day reverse repurchase rate to 1.5% from 1.7%.

"The Chinese government is expected to lower the outstanding mortgage rate and reduce the down payment required for second home purchases. Additionally, there may be opportunities to renegotiate or refinance existing mortgages among banks, and the government plans to enhance its re-lending program for state-owned firms to help absorb unsold property inventories," said Parthiv Jhonsa, lead analyst, metal and mining, Anand Rathi Institutional Equities.

The move is expected to increase lending power of the Chinese banks, which can support investments in metal-consuming segments like infrastructure and manufacturing. This will improve the Chinese demand in the international commodity markets for metals subsequently aid metal prices.

Historically, while a rebound in metal prices is anticipated in the short-term, it has often fallen short of expectations, said Jhonsa.

Anand Rathi Institutional Equities believes that the Chinese housing market has been struggling for the past four years, and unless there is stabilisation in prices and a reduction in unsold inventory, any government initiatives will likely be inadequate.

The NSE Nifty Metal rose 2.68% to 9,707.90, touching the highest level since Aug. 1. The index has recorded a three-day winning streak. It was trading 2.44% higher at 9,685.55 as of 10:41 a.m., as compared to 0.10% advance in the NSE Nifty 50.

Tata Steel Ltd. and Vedanta Ltd. stocks contributed the most to gains in the Nifty Metal, according to data on National Stock Exchange.

Shares of National Aluminum Co. lead, with a 5.69% intraday gain. The stock was trading 4.69% higher at Rs 188.70 per share as of 10:42 a.m.

NMDC Ltd. was the second top gainer in the index. It was trading 4.10% higher at Rs 224.23 per share as of 10:43 a.m.

APL Apollo Tubes Ltd. shares logged the least gains, making the company the worst performer among peers. They pared morning gains to trade 0.08% higher at Rs 1,427.00 apiece as of 10:44 a.m.