Why Metal stocks like Vedanta, SAIL, NMDC are falling on Friday: Explained from

Vedanta, SAIL, NMDC nosedive: Reasons exposed

Key Takeaways

Metal stocks faced a steep decline on Friday, led by Vedanta, SAIL, and NMDC.
Analysts attribute the fall to a combination of factors, including profit-booking after recent gains, concerns over China's demand slowdown, and expectations of a rate hike by the US Federal Reserve.
Vedanta particularly suffered due to profit-booking after its recent strong performance and concerns over copper prices.

In-Depth Analysis

Metal stocks have been on a downward spiral lately, and Friday's trading session was no exception. The BSE Metal index plunged by over 3%, led by heavyweights Vedanta (-5%), SAIL (-4.5%), and NMDC (-3%). Analysts point to several factors behind this decline. One major reason is profit-booking after the recent rally in metal stocks. The sector had outperformed the broader market in recent months, buoyed by strong demand from China and expectations of a global economic recovery. However, as prices reached overbought levels, investors decided to lock in their gains. Another factor weighing on metal stocks is the growing concern over China's demand slowdown. China is the world's largest consumer of metals, and any slowdown in its economy can have a ripple effect on global demand. Recent economic data from China has been mixed, raising concerns about the strength of its recovery. Adding to the bearish sentiment is the expectation of a rate hike by the US Federal Reserve. The Fed is widely expected to raise interest rates in March to combat rising inflation. Higher interest rates typically lead to a stronger US dollar, making commodities priced in dollars more expensive for other countries. Vedanta, in particular, has been hit hard by profit-booking after its recent strong performance. The stock had surged by over 50% in the past six months, driven by strong copper prices. However, as copper prices cooled down, investors decided to take some profits. Other factors specific to Vedanta include concerns over its high debt levels and the recent fall in copper prices. Copper is a key revenue generator for Vedanta, and a decline in its price can significantly impact the company's profitability. With the broader market also facing headwinds, metal stocks are likely to remain under pressure in the near term. However, analysts believe that the long-term outlook for the sector remains positive, supported by the global economic recovery and the increasing demand for metals in emerging economies.