Nifty Metal on track for best weekly rally in 4 years amid easing trade tensions

Metal stocks in focus: Shares of Tata Steel, Adani Enterprises, Hindustan Copper, Vedanta, and Hindalco Industries are set to close this week with gains of over 14% as investors' appetite for metal stocks resumed following an ease in trade tensions between the world’s two largest economies, lifting bets that the demand for base metals will not be as badly impacted as previously projected.

In fact, India’s metal sector has emerged as the biggest beneficiary following the trade deal between the US and China. Additionally, expectations of a revival in domestic demand in the current fiscal year, coupled with India's safeguard duties on steel imports, have made metal stocks recent hot picks on Dalal Street.

Moreover, fears of the global economy collapsing this year have eased as expectations grew that Washington would further roll back steep tariffs on its trading partners following the deal with China, which has also lent support to metal stocks this week. 

Jindal Steel, Adani Lead gains in weekly metal rally

The Nifty Metal index, which includes PSU stocks such as National Aluminium, SAIL, and Hindustan Copper, has surged 9.17% so far this week, its biggest weekly gain since May 2021.

Among individual stocks, Jindal Steel & Power led the gains with a jump of 14.25%, followed by Adani Enterprises at 14%, Jindal Stainless at 13.14%, National Aluminium at 13%, SAIL at 12.3%, Lloyds Metals & Energy at 11.11%, Hindustan Copper at 11.05%, Tata Steel at 10.2%, NMDC at 9.07%, Vedanta at 8.11%, and Hindustan Zinc at 8%.

On Monday, the US and China announced a trade deal, including a 90-day pause on tariffs and a reduction in reciprocal duties by 115 percentage points. The latest development marks the first step towards de-escalation of trade tensions between the two nations, following former US President Donald Trump’s reciprocal tariff announcement on April 2.

The agreement between the US and China has not only lifted sentiment around base metal prices but has also led to a strong recovery in crude oil prices and global stock markets.

Previously, the tit-for-tat trade policies between the US and China had raised fears that demand for copper, zinc, and other industrial metals could be severely impacted, as both nations together account for 45% of global GDP. However, those concerns have now somewhat subsided.

Although the trade deal is temporary, experts believe the two economic superpowers may eventually find a more permanent resolution to their differences.

Following the trade deal, global brokerage firm JPMorgan cut the chance of a US recession.

JP Morgan said the chances of a US recession this year have fallen below 50%, down from a previous estimate of 60%, following Trump's announcement of sweeping tariffs on April 2. It also noted that the tariff changes have reduced the average effective tariff rate from 24% to 14%, representing a tax cut of nearly $300 billion.

For context, China consumes nearly 50% of the global output of base metals such as copper, aluminum, zinc, nickel, and lead. This demand is largely driven by the country’s massive manufacturing sector, which relies heavily on these metals for production.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.