Market Movers: Why metal stocks are rallying and what’s giving Maruti engine trouble

Shares of ferrous and non-ferrous metal producers soared in today’s trade like the rocket that sent Amazon’s chief Jeff Bezos to space. The Nifty Metal index surged 5 per cent, its biggest one-day gain in recent months.

The main drivers of the rally were a clutch of important developments in China, the world’s largest commodity consumer. The Chinese government has reportedly decided it no longer wants to give incentives to its steel companies to export and instead wants to dissuade them altogether.

Additionally, several provinces are looking to reduce steel manufacturing capacity in order to comply with the Communist Party’s objective of reducing carbon emissions as part of the five-year plan. Both of the developments are heaven sent for Indian steel makers as it would not only boost global steel prices but also export demand from India.

ArcelorMittal also had a hand to play in the spurt in prices of steel stocks as the company reported its best earnings in 13 years for the June quarter and suggested that demand and pricing environment is so strong that it can’t hold back its excitement.

After months of doubts if the rally in the metal stocks was over, the sector has provided a good reminder to investors to not doubt its potential. Onwards and upwards it is then!

Hard days for Maruti

While metal companies were enjoying renewed optimism in their prospects, was sulking as analysts after analysts berated the company’s June quarter earnings. The stock fell over 2 per cent and was the worst Nifty performer after reporting extremely weak numbers on Wednesday. But that is not all there is to it.

Analysts are now fearful that the company is setting itself up for ceding ground in the Indian passenger car market because of lack of strong new models, especially in the fast-growing sports utility vehicle segment. Combine that with the overall weak demand for automobiles and rising cost pressures and even we feel depressed.

Showstopper

While steel companies were on everyone’s lips because of the stellar gains they posted, let’s not forget it was Hindalco Industries that ended 10 per cent higher and as the top gainer on the Nifty50. Investors lapped up the company’s stock after the strong guidance by its subsidiary Novelis Corporation and its global peers.

Commentary by several global aluminium giants this week have suggested that demand outlook is as bright as it could be despite the threat from spreading Delta variant of Covid-19. Investors are fairly confident that if the global giants are so bullish, there is no reason they should doubt their own stable horse.