The Hindu Business Line : Bears hug metal stocks

Mumbai, Jan. 24 Metal stocks bore the brunt of Thursday’s market crash. BSE Metal index plunged 860 points to 15,081-level, the sharpest fall among all the sectoral index.

Hindustan Zinc, which recorded a 41 per cent fall in net profit to Rs 785 crore in the December quarter, dipped 10 per cent to Rs 569. The company has reduced zinc prices by 2.36 per cent to Rs 1,01,900 per tonne and lead prices by 3.27 per cent to Rs 1,12,500 per tonne. Both the price cuts are effective immediately.

Profit booking

Among other metal stocks, Hindalco lost 5 per cent to Rs 152, Hindustan Copper 5 per cent to Rs 371 and Tata Steel 4 per cent to Rs 671. “In the last one year, metal stocks have gained more than 100 per cent. So it was time for profit booking,” said Mr Ashish Poddar, metal analyst, Almondz Global Securities Ltd.

Fears of an economic recession have been plaguing metal stocks for the last few months. Copper prices on London Metal Exchange have fallen from $8,000 per tonne in April last year to $7,000 level presently. A slowdown in growth, especially in the construction sector, would cripple demand for the base metals.

Strong demand

Chinese restocking in the run-up to the Lunar New Year has propped up the price in the last few days, and outflows of the red metal from LME monitored warehouses have been steady.

Copper stockpiles declined by 1,875 tonnes to 1,74,300 tonnes at LME monitored warehouses on Wednesday, said an analyst.

“We remain bullish on metal sector. Given the strong demand, companies should be able to pass on the high raw material costs to end consumers. This is a positive sign for the sector,” Mr Poddar said.

Analysts predict metal prices to fall as much as 15 per cent in 2008 due to a global economic slowdown.

China, the world’s biggest consumer of metals, has raised interest rates six times in the past year, and increased limits on bank loans to slow its economy and curb inflation which is at an 11-year high.