SAIL shares crash around 6%, making it the top loser in the Nifty Metal index amid China concerns

Shares of Steel Authority of India Ltd (SAIL) saw a sharp decline on Friday, December 13, falling nearly 6 percent in intra-day trading, becoming the top loser in the Nifty Metal index. This drop ended a six-session winning streak for the stock, driven by broader market weakness. The Nifty Metal index, a key benchmark for metal stocks, also lost over 2 percent during the session, reflecting widespread pressure across the sector.

Impact of Global Factors

Anshul Jain, Head of Research at Lakshmishree Investment and Securities, attributed the decline in metal stocks to a cooling of global metal prices. This trend is being driven by reports that China is planning to further weaken the Yuan against the US Dollar next year.

Adding to the uncertainty, China’s government on Thursday announced plans to expand its budget deficit, issue more debt, and implement monetary easing measures. These steps aim to maintain stable economic growth amid concerns over escalating trade tensions with the United States as Donald Trump prepares to return to the White House. However, the details of the proposed stimulus measures remain vague. While officials at China’s annual agenda-setting meeting promised more robust economic support, specific plans and their potential impact on the global metal market have yet to be clarified.

China, the world’s second-largest economy, continues to grapple with weak domestic consumption, a prolonged property sector crisis, and rising government debt. Economists warn that these issues pose significant challenges to Beijing’s ability to meet its official growth targets. More direct fiscal stimulus, particularly targeting domestic consumption, is deemed necessary to address these challenges fully. The prospect of heightened trade tensions with the US adds further complexity to China’s economic outlook.

Performance of SAIL

SAIL’s stock hit an intra-day low of ₹121.90, marking a 5.8 percent decline. The stock is now trading approximately 31 percent below its 52-week high of ₹175.65, reached in May 2024. Despite this, SAIL has shown some resilience, advancing over 19 percent from its 52-week low of ₹102.15, recorded in December 2023.

Over the past year, SAIL’s stock has delivered a 25 percent gain, though it has declined by 1.5 percent year-to-date in 2024. After rising by 2 percent in November, the stock added over 4 percent in December, reflecting some recovery. However, it faced a significant 18 percent drop in October, highlighting its volatility.

Technicals

Jain expects the metal PSU stock to go down around ₹110 apiece mark, its current swing low. So, those with SAIL shares are advised to maintain a strict stop loss below ₹110.

“On breaching ₹110 below, we may see SAIL share price go down to around ₹99 apiece levels. So, SAIL shareholders should maintain a stop loss below ₹110 and exit on any rise or relief rally,” he said.

Broader Metal Sector Trends

The weakness in SAIL’s performance was mirrored across other Nifty Metal constituents. The Nifty Metal index shed nearly 3 percent, with all its components closing in the red. SAIL emerged as the top loser in the index, followed by NMDC, Hindustan Copper, JSW Steel, and Tata Steel, each down over 3 percent.

Other metal stocks, including Hindalco, NALCO, Vedanta, Welspun Corp, APL Apollo Tubes, JSPL, and Hind Zinc, also declined by 1 to 3 percent. The widespread sell-off highlights investor concerns about the impact of China’s economic strategies and global trade dynamics on the metal sector.

The metal sector’s performance remains closely tied to developments in China, a key player in global metal demand and supply. Market participants will be watching closely for more details on Beijing’s stimulus measures and their potential to stabilize the Chinese economy. Additionally, the trajectory of the US-China trade relationship under the incoming US administration will likely play a significant role in shaping the sector’s outlook.

Disclaimer: 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 taking any investment decisions.