Shares of ten metal and mining companies dropped by 0.39% to 4.32% at 12:10 IST on BSE after a global credit rating agency cut China's sovereign credit rating for the first time since 1999.
Meanwhile, the S&P BSE Sensex was down 262.49 points or 0.81% at 32,107.55. The S&P BSE Metal index was down 310.43 points or 2.23% at 13,581.93.
Bhushan Steel (down 1.16%), Jindal Steel & Power (down 4.32%), Vedanta (down 2.68%), Tata Steel (down 1.91%), NMDC (down 2.88%), Hindalco Industries (down 3.03%), Steel Authority of India (down 3.44%), JSW Steel (down 0.39%), Hindustan Zinc (down 2.29%) and National Aluminium Company (down 3.11%) edged lower. China is the world's largest consumer of steel, copper and aluminum.
The BSE Metal index had outperformed the market over the past one month till 21 September 2017, gaining 8.91% compared with the 3.55% gains in the Sensex. The index had also outperformed the market in past one quarter, gaining 23.96% as against Sensex's 3.47% gains. The index had also underperformed the market over the past one year, rising 42.94% compared with the 13.55% gains in the Sensex.
S&P Global Ratings cut China's sovereign credit rating for the first time since 1999, citing the risks from soaring debt, and revised its outlook to stable from negative.
The sovereign rating was cut by one step, to A+ from AA-, the company said in a statement late yesterday, 21 September 2017.
In the event that China were to default on its external debt, S&P said that three foreign banks operating there would be "unlikely to withstand a stressed scenario."
The downgrade, the second by a major ratings company this year, represents ebbing international confidence that China can strike a balance between maintaining economic growth and cleaning up its financial sector.
Moody's cut its rating on China to A1 from Aa3 in May this year, citing similar concerns over economy-wide debt and effects on state finances. Moody's cited the likelihood of a material rise in debt and the burden that will place on the state's finances, while also changing the outlook to stable from negative.
Meanwhile, High Grade Copper for December 2017 delivery was currently down 1.24% at $2.898 per pound on the COMEX.
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