Metal stocks came under severe selling pressure on Monday, March 23, declining up to 6% and emerging as the worst sectoral performer today as the Indian stock market crashed following the prolonged and disruptions to oil and energy supply.
All index constituents traded in the red, dragging the 4.25% lower to 10,927 today. shares, down 6.4%, emerged as the worst losers. They were followed by , its parent , SAIL and NMDC, each losing over 5%. Vedanta shares also remain in focus ahead of the board meeting later today to consider dividend payout.
Steel companies like Tata Steel, JSW Steel and Jindal Steel also declined significantly between 4.3-4.9%.
Overall, the Nifty Metal index is down 10.8% in March so far, and on track to not only snap their three-month losing run but also to post the worst fall since February 2023.
Why are metal stocks falling?
According to analysts, the two main factors weighing on the metal stocks this month are the sectoral rotation after rising consistently due to rising metal prices and fears of demand destruction amid the latest geopolitical conflicts.
The sectors that were holding strong earlier have now started to witness some pressure, said Ajit Mishra of Religare Broking. Energy, pharma, and metals were the key sectors that had been outperforming.
He added that with the recent escalation and rising tensions, concerns have shifted toward a potential slowdown in overall demand due to geopolitical uncertainty, which he believes could be one other reason behind the fall in metal stocks.
Domestic brokerage ICICI Securities expects a prolonged conflict for steel players, which could lead to some demand correction, likely in line with production cuts. The stainless steel manufacturing is heavily dependent on industrial gases such as propane/LPG and . Amid the supply crunch, Jindal Stainless has announced it would operate plants at rationalised capacity.
ICICI Securities said there could be a 2–3% decline in crude steel production, assuming a 30–40% cut in gas supplies.
“However, a higher global cost curve could enable Indian steel players to raise prices by ₹1,000–1,500/tonne, offsetting energy cost pressures and supporting margins for BoF-based producers. We do not foresee significant demand destruction, as India’s energy mix is largely coal-based (~60%), with gas contributing only 6–7%,” it added.
As for aluminium players, JM Financial believes that higher aluminium prices are supportive of near-term margins, but persistently elevated prices could weigh on demand. Prices have already risen from about $3,065/tonne in February to around $3,470/tonne now. The main concern is that conflict could affect production and shipping from Gulf countries, especially through the Strait of Hormuz, which is a key global trade route, as per the brokerage.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.