Though the market started on a strong footing despite mixed cues from Asian markets, metal stocks were under tremendous pressure on Monday. Shares of steel companies fell up to 14 per cent on the BSE in Monday’s trade, after the government levied export duty on 11 iron and steel intermediates and key steel products. The government levied an export duty of 15 per cent on almost all the major steel products.
Top Metal Names Bleed
Top metal stocks crumbled as JSW Steel, Tata Steel touched lower circuits, while Hindalco dropped more than 5 per cent as Nifty Metal corrected more than 7 per cent in the early trade on Monday. Besides, Steel Authority of India (SAIL) also tanked over 10 per cent trade on its 52-week low.
Nifty Metal Index Top Loser
At 11:29 am; Nifty Metal index, the top loser among sectoral indices, was down 7.13 per cent, as compared to 0.03 per cent decline in the Nifty50 index. Besides this, Godawari Power & Ispat, Sandur Manganese & Iron Ores, Sarda Energy & Minerals, Jindal Stainless and Sunflag Iron & Steel Company, the non-index stocks were also down between 10 per cent and 20 per cent on the BSE.
Steel Stocks Under Pressure Amid Geopolitical Tensions
Additionally, metal stocks were already under pressure amid geopolitical tensions as Nifty Metal has corrected nearly 18 per cent in the past one month as on May 23. Steel stocks have almost corrected between 20-40 per cent from their 52-week highs due to rising coal prices, falling demand and weak international prices.
Why Are Steel Steel Stocks Falling Today?
The government on Saturday waived customs duty on the import of some raw materials, including coking coal and ferronickel, used by the steel industry, a move which will lower the cost for the domestic industry and reduce the prices.
“Most of the exports of steel/stainless steel will attract 15 per cent export duty now (from nil earlier). We see this as an extremely negative development for the steel sector and expect broad-based multiple de-rating,” brokerage house ICICI Securities said after the government move.
The move will send a negative signal to investors and adversely impact capacity expansion projects under PLI scheme, steel industry players told news agency PTI said after the government removed customs duties on raw materials and hiked export taxes to check local prices.
Several brokerage houses have also downgraded the sector post government’s move. ICICI Securities downgraded Tata Steel, JSPL, JSW Steel and SAIL to REDUCE. It was of the view that it was expecting an EBITDA increase cycle to play out over the next 3-4 quarters in steel, but the same has been interrupted
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