Nifty Metal index outperforms Nifty 50 in 1-month; gains 8%

The Nifty Metal index in Tuesday’s session (May 21, 2024) emerged as the outlier even as the headline indices ended on a mixed note despite positive global markets. The index on a 1-month basis has climbed 7.85 per cent, sharply outperforming the headline index Nifty 50 which has delivered as much as 1.6 per cent return during the period. 

Of the 15 constituents within the index, all but 4 stocks, including Ratnamani Metals, Jindal Stainless, NALCO and Welspun Corp, ended in the green.

Hindustan Zinc and its parent entity Vedanta registered the most gains of up to 20 per cent. At the close, shares of Hindustan Zinc were locked in the 20 per cent upper circuit at Rs 742.55, which is also the stock’s all-time high price. 

Much of the spurt in Hindustan Zinc has come off as zinc prices have reportedly climbed 3.13 per cent in the previous day’s trade, led by recent stimulus measures in China to boost future demand in the construction space. Importantly, given the current turmoil in the country's property market, zinc which is an essential commodity has been facing the wrath.

Other notable gainers from the pack included stocks such as JSPL, Hindalco, Tata Steel, JSW Steel, Hindustan Copper, APL Apollo Tubes, SAIL, Adani Enterprises and NMDC which gained between 1-5 per cent.

Measures by China to stabilize the real estate market lifted the price of metals. Rise in Industrial output in April, which was above forecast. All such factors supported the metal price and attracted investors toward metal stocks, said Vaibhav Vidwani- Research Analyst, Bonanza Portfolio.

After the most recent data revealed that house prices had fallen by about 10% since the year's beginning, China unveiled an array of new policies on Friday to boost its weakening real estate sector. The central bank announced plans to lower the minimum down payment required for mortgages and remove the floor on interest rates for both primary and secondary homes, the analyst added.

How do technicals look for Nifty Metal index?

The metal index has knocked a new historic peak, surging over 20 percent so far this month.  The underlying trend remains highly optimistic, with a healthy correction eyeing accumulation, notes Avdhut Bagkar, Derivatives and Technical Analyst, Stoxbox.

The overall trend is to gauge higher levels, unless the support 9250 is shattered. The trend is headed to 10100-11250 levels, he added.  Despite the strength oscillator, Relative Strength Index setting foot in the overbought category, the selling pressure is not letting metal stocks to hit any weakness, as per the daily chart.  The broader outlook emphasises on “Higher High, Higher Low” formation, which appears to scale further uncharted territories in the following months, he says.