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The Steel Authority of India Ltd (SAIL) experienced a significant downturn on December 13th, with its shares plunging nearly 6% in intraday trading. This dramatic fall marked the end of a six-session winning streak and positioned SAIL as the biggest loser within the Nifty Metal index. The broader market weakness contributed to this decline, with the Nifty Metal index itself experiencing a substantial loss exceeding 2%. This downturn underscores the interconnectedness of global markets and the sensitivity of the metal sector to macroeconomic shifts, particularly those originating from China.
Anshul Jain, Head of Research at Lakshmishree Investment and Securities, attributed the decline in metal stocks, including SAIL, to a cooling of global metal prices. This cooling is largely attributed to anxieties surrounding China's economic strategies. Reports suggest that China is planning to further weaken its Yuan against the US dollar in the coming year, adding to the uncertainty surrounding its economic trajectory. The announcement of plans to expand its budget deficit, issue more debt, and implement monetary easing measures further fueled this uncertainty. While these measures aim to stabilize economic growth amid rising trade tensions with the United States, the lack of specific details about the stimulus packages leaves investors apprehensive.
China's current economic challenges, including weak domestic consumption, a prolonged property sector crisis, and increasing government debt, pose significant risks. Economists warn that these issues could hinder Beijing's ability to achieve its official growth targets. The need for more direct fiscal stimulus, especially measures aimed at boosting domestic consumption, is widely acknowledged. The looming threat of heightened trade tensions with the US under the incoming Trump administration further complicates China's economic outlook and contributes to the volatile nature of global metal markets. This uncertainty is directly impacting investor confidence and driving down metal stock prices, with SAIL bearing the brunt of this negative sentiment.
SAIL's stock reached an intraday low of ₹121.90, representing a 5.8% decrease. This places the stock approximately 31% below its 52-week high of ₹175.65, achieved in May 2024. Despite this significant drop, SAIL has demonstrated some resilience, having climbed over 19% from its 52-week low of ₹102.15, recorded in December 2023. The stock's performance over the past year shows a 25% gain, although it has experienced a 1.5% year-to-date decline in 2024. The volatility is evident in the significant 18% drop in October, followed by a recovery with a 2% increase in November and over 4% in December, before the recent sharp decline.
Jain's analysis suggests that SAIL's stock price could fall further, potentially reaching ₹110 per share, its current swing low. He advises investors holding SAIL shares to set a strict stop-loss order below ₹110. A breach of this level could lead to a further decline towards ₹99, according to his prediction. This reinforces the cautious outlook for SAIL and highlights the need for risk management strategies among investors. The widespread sell-off in the broader metal sector mirrors SAIL's performance, indicating a sector-wide concern about the ramifications of China's economic policies and global trade dynamics.
The Nifty Metal index suffered a nearly 3% decline, with all its components closing in the red. Besides SAIL, NMDC, Hindustan Copper, JSW Steel, and Tata Steel each experienced losses exceeding 3%. Other metal stocks, including Hindalco, NALCO, Vedanta, Welspun Corp, APL Apollo Tubes, JSPL, and Hind Zinc, also witnessed declines ranging from 1% to 3%. This widespread downturn underscores the significant impact of China's economic strategies and the US-China trade relationship on the global metal sector. The market's close attention to developments in China reflects its pivotal role in global metal demand and supply. Future developments regarding Beijing's stimulus measures and the trajectory of US-China trade relations will be crucial in shaping the sector's outlook.
Source: SAIL shares crash around 6%, making it the top loser in the Nifty Metal index amid China concerns