Metal stocks were under pressure on Monday in an otherwise strong market, after the government hiked export duty on key steel products to 15 percent.
The Nifty Metal index fell over 8 percent in intra-day deals, as against a 0.6 percent rise in benchmark Nifty.
Meanwhile, in order to reduce the overall cost of domestic production of steel products, the government slashed the import duty on coking coal and anthracite from 2.5 percent to zero. Meanwhile, import duties for coke or semi-coke and ferronickel were lowered too, from 5 percent to zero and 2.5 percent to zero, respectively.
Among individual stocks, JSPL tanked over 15 percent while JSW Steel cracked 12 percent. JSL Hisar, Tata Steel, SAIL, and NMDC also shed between 9 snd 11 percent. Other metal stocks, including Hindustan Copper, Hindalco, NALCO, Vedanta, and Adani Enterprises, were also in the red.
Other non-index stocks like Jindal Stainless, Godawari Power & Ispat, Sarda Energy & Minerals, Sandur Manganese & Iron Ores, and Sunflag Iron & Steel Company were also down between 10 percent and 20 percent in intra-day deals.
In recent times, steel stocks have corrected between 20-40 percent from their 52-week highs due to rising coal prices, falling demand and weak international prices. This latest development has added to the woes.
Domestic brokerage house Motilal Oswal noted that due to various measures announced by the government, near-term correction in steel stocks is imminent. "We believe the ramification of such a measure taken by the government will be felt widely across all parts of the industry. We would wait for the industry to articulate how they plan to navigate these circumstances before taking a view on the stocks," it said
ICICI Securities, in a recent report, said that the government's export duty would drive volumes to domestic markets.
"On the back of the Russia-Ukraine conflict, there was a healthy uptick witnessed in global steel prices over the last few months. Exports had become a lucrative market for domestic players due to healthy realisations. However, the recent step to levy export duty on various steel products would lead to a reasonable quantum of volumes to be shifted to the domestic markets. Also accessing the current lucrative global export would come at a cost," ICICI Stated.