Metal stocks buck the trend on China stimulus, BSE Metal index rises 0.85%

Metal stocks bucked the weak market trend on Wednesday on optimism that measures taken by China to shore up its economy will boost demand. The BSE Metal index rose 0.85 per cent, with National Aluminium Co (Nalco), Jindal Steel and Tata Steel gaining between 1.1 per cent and 2.1 per cent.

The gains followed the Chinese government's decision to step up its fiscal stimulus. The country's top parliament body has approved a 1 trillion yuan ($137 billion) in sovereign bond issuance to help rebuild areas hit by this year's floods and improve urban infrastructure to cope with future disasters.

In a rare move, China sharply lifted its 2023 budget deficit to around 3.8 per cent of gross domestic product from an originally set 3 per cent due to the rise in central government debt, according to state media. The world's second-largest economy consumes almost half of the global metals supply. As a result, China's economic outlook has a huge bearing on metal prices.

"The losses in the market were contained by metal stocks which gained today following news reports of China announcing stimulus measures, which is a positive for the Chinese economy and subsequently for metal prices across the world," said a note by StoxBox.

The BSE Metal index is up 7.7 per cent so far this calendar year, slightly outperforming the benchmark Nifty 50 index, which is up 5 per cent. China's GDP rose 4.9 per cent for the July-September 2023 period year-on-year. The move prompted economists to lift their growth forecasts for China. Analysts believe a sustained economic recovery in China can lead to a pricing as well as demand recovery for the metals sector.