The Nifty Metal Index slumped 3.37 intraday on Monday, as heavy selling pressure dragged down key stocks across the sector.
Among major losers, Vedanta saw the steepest fall, tumbling 6.01 per cent to Rs 413.45, followed by NMDC (down 5.36 per cent), SAIL (down 5.67 per cent), and Hindalco (down 3.36 per cent). JSW Steel and Tata Steel also dropped 1.42 per cent and 3.21 per cent, respectively.
The decline in steel stocks follows US President Donald Trump's decision to impose tariffs on imports, including 25 per cent on goods from Canada and Mexico and 10 per cent on those from China.
Analysts say that any tariff war generally triggers concerns about growth, which is not good for metal stocks. This concern has triggered a broad-based decline in metals stocks which is not restricted to any particular stock, they said.
"Tariffs raise prices and distort supply chains, which can negatively impact industrial growth. If materials become more expensive, buyers may either delay projects, switch to alternatives, or reduce purchases altogether," said Amit Dixit, research analyst, ICICI Securities.
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In the past 30 days, the Nifty Metal Index dropped 4.94 per cent, with stocks like Jindal Steel emerging as the worst performer, plunging 18.27 per cent. Ratnamani Metals (down 11.25 per cent), Adani Enterprises (down 11.29 per cent), JSW Steel ( down 7.12 per cent), APL Apollo ( down 7.89 per cent), and Jindal Stainless (down 7.89 per cent) have also seen sharp corrections.
Weaker-than-expected demand recovery post the festival season, subdued steel prices, and limited export opportunities have marred the performance of the metal industry, said analysts at Elara Capital in a recent report.
“US President, Donald Trump, may influence China's indirect metal exports, marring domestic demand and leading to aggressive export strategies,” Elara Capital said.
On the possibility of metal dumping in India, Dixit said that while the US tariffs on China could lead to more metal being dumped in India, that is a short-term concern, with the bigger question being how demand and pricing will adjust in the long run.
Outlook
Volatility in steel stocks will persist in the near future as markets await potential retaliatory measures from China and Mexico, unlike Canada, which has already responded with a 25 per cent tariff on US goods.
However, analysts say that India’s domestic steel consumption remains strong and if safeguard duties are implemented, local steelmakers will be in a better position compared to nonferrous metal producers.
"We have a buy rating on Tata Steel and JSW Steel, as they are better placed in the current environment. Meanwhile, stocks with overseas exposure, like Hindalco and Vedanta, may face near-term challenges due to global volatility," Dixit said.
Tech view
According to technical pundits, the metal index has formed a double-bottom structure near the 8,000 mark, which aligns closely with the S3 Camarilla yearly pivot, a significant support zone. This they say, suggests a strong base formation, reducing downside risks.
"Additionally, a bullish Bat pattern has emerged on the hourly chart, indicating a potential reversal and a sharp rebound in the index.These technical factors collectively signal a bullish outlook for the short term," said Jigar Patel, senior manager, technical research, Anand Rathi Shares and Stock Brokers.
The metal index may find support in the 8,000-7,800 zone, while on the upside, resistance is expected around 8,450-8,500.
