Metal stocks were under pressure as major raw material costs rose due to supply delays and geopolitical uncertainties from the Russia-Ukraine war.
At the beginning of the Russian-Ukraine crisis, metal stocks were on fire, delivering 5-10% gains in a matter of weeks. Only the metal sector traded in the green when the entire Nifty Indices were in negative.
For instance, Tata Steel went from ₹1074/share on Feb 24 to ₹1303.30/share on Mar 3, which increased by 21% in just 8 days.
During that period, experts believe that Indian steelmaker companies will benefit from the crisis as the war worsened the steel supply and they also forecast that the export-oriented companies may benefit as Indian companies operate at the lower end of the global cost curve due to lower labour and iron ore costs compared to other countries.
But now, all seems to have faded away as the sector is facing supply shortages and high raw material costs.
The Nifty metal index reached a historic high of 6,825 points in April 2022 and has since been on a downward trend. The index has lost 14 per cent since its peak and continues to fall. Prior to this adjustment, the index had risen threefold from lows of 1,480-odd during the COVID -19-induced decline.
During that time, the index has dropped about 50%. Tata Steel, which has grown fivefold to ₹1,534, and Vedanta, which has grown eightfold, are both displaying signs of weakness.