Informist, Monday, May 23, 2022
By Joe Milton
MUMBAI – The unprecedented move by the government to curb commodity inflation by imposing export tariffs on steel led to an intense sell-off in the metal space which also weighed down the benchmark indices.
The government imposed 15% duty on steel exports which is likely to dampen the earnings outlook and capacity expansion plans of steel makers prompting investors to sell metal stocks.
Shares of Tata Steel, Steel Authority of India, and JSW Steel slumped 10-20% with all these stocks touching their 52-week low. Among others, Jindal Steel & Power, Jindal Stainless, and NMDC closed 12-20% lower.
The sell-off also had a cascading effect on other metal counters as investors feared that similar policy measures could be adopted by the government on aluminium too.
“With inflation targetting as the major reason for such a significant export duty increase, we feel there is a real risk of policy measures being introduced in aluminium as well,” said ICICI Securities in its report.
On the back of this, shares of Hindalco Industries, National Aluminium Co, Vedanta, and Hindustan Copper ended 3-6% lower with the Nifty Metal index being the worst-hit among sectoral indices.
The Nifty Metal index corrected sharply due to negative news flows in metal stocks which led to the resumption of its downtrend, said Ruchit Jain, lead research analyst at 5paisa.com. The index has corrected 23% from its all-time high touched in early April.
The selling pressure in the metals pack limited the upside for the headline indices with Nifty 50 facing stiff resistance at 16400 points.
The 50-stock index gained and touched an intraday high of 16414.70 points, but erased all its gain in the second half of the session and closed 0.3% lower at 16214.70 points.
Analysts believe that a breakout beyond 16400 points is needed for the next leg of up move for the Nifty 50 index.
Similarly, BSE-Sensex closed 0.1% lower at 54288.61 points after touching the day’s high of 54931.30 points.
Besides metal companies, the sudden selling in bank stocks at around 1400 IST also dragged the headline indices sharply lower after which they failed to recover.
Shares of banks initially extended gains after the Reserve Bank of India governor said banks will have enough liquidity to push credit growth and excess liquidity will be removed from the system in a more calibrated manner.
But likely institutional selling dragged bank stocks lower with the Nifty Bank closing 0.1% down at 34247.60 points.
Apart from this, an excise duty cut on petrol and diesel by the government to tame inflation resulted in aggressive buying of automobile stocks.
Other sectoral tailwinds like lower metal prices and normal monsoon prediction also encouraged investors to accumulate automobile stocks. Shares of Mahindra & Mahindra, Maruti Suzuki India, Hero MotoCorp, and TVS Motor Co closed 1-5% higher.
On the stock-specific front, shares of Divi’s Laboratories slumped about 10% and closed at 3,897.90 rupees as the company refrained from giving sales growth guidance for 2022-23 (Apr-Mar) amid global uncertainties like the Russia-Ukraine war.
Shares of Gland Pharma fell about 3% and closed at 2,983.60 rupees after Informist reported that the company has put its plans to manufacture COVID-19 vaccine Sputnik on hold.
Shares of major iron ore pellet exporters Sarda Energy and Minerals, and Godawari Power and Ispat plunged 20% as the government has imposed 45% export duty on the commodity.
The selling pressure also had an impact on the broader market with all the small-cap and mid-cap indices closing 0.5-1.0% lower.
* Among Nifty 50 stocks, 25 rose and 25 fell
* Among Sensex stocks, 20 rose and 10 fell
* On the NSE, 792 stocks rose, 1,297 fell and 75 were unchanged
* On the BSE, 1,421 stocks rose, 1,989 fell and 167 were unchanged
* Nifty Auto: Up 1.84%; Nifty IT: Up 1.01%; Nifty Pharma: Down 1.35%
BSE National Stock Exchange
Sensex: 54288.61 points, down 37.79 pts (0.07%) Nifty 50: 16214.70 points, down 51.45 pts (0.32%)
S&P BSE Sensitive Index Nifty 50
Lifetime High: 62245.43 (Oct 19) : Lifetime High: 18604.45 (Oct 19)
Record Close High: 61765.59 (Oct 18) : Record Close High: 18477.05 (Oct 18)
2022 1st day close: 59183.22 (Jan 3) : 2022 1st day close: 17625.70 (Jan 3)
2022 Closing High: 61308.91 (Jan 17) : 2022 Closing High: 18308.10 (Jan 17)
2022 Closing Low: 52792.23 (May 19) : 2022 Closing Low: 15782.15 (May 13)
2022 High (intraday): 61385.48 (Jan 17) : 2022 High (intraday): 18321.55 (Jan 17)
2022 Low (intraday): 52260.82 (Mar 8) : 2022 Low (intraday): 15671.45 (Mar 8)
2021 Closing High: 61305.95 (Oct 14) : 2021 Closing High: 18338.55 (Oct 14)
2021 Closing Low: 46285.77 (Jan 29) : 2021 Closing Low: 13634.60 (Jan 29)
2021 High (intraday): 61353.25 (Oct 14) : 2021 High (intraday): 18350.75 (Oct 14)
2021 Low (intraday): 46160.46 (Jan 29) : 2021 Low (intraday): 13596.75 (Jan 29)
2020 Closing High: 47751.33 (Dec 31) : 2020 Closing High: 13981.95 (Dec 30)
2020 Closing Low: 25981.24 (Mar 23) : 2020 Closing Low: 7610.25 (Mar 23)
2020 High (intraday): 47896.97 (Dec 31) : 2020 High (intraday): 14024.85 (Dec 31)
2020 Low (intraday): 25638.90 (Mar 24) : 2020 Low (intraday): 7511.10 (Mar 24)
2019 High (intraday): 41809.96 (Dec 20) : 2019 High (intraday): 12293.90 (Dec 20)
2019 Low (intraday): 35287.16 (Feb 19) : 2019 Low (intraday): 10583.65 (Jan 29)
2018 High (intraday): 38938.91(Aug 28)) : 2018 High(intraday): 11760.20 (Aug 28)
2018 Low (intraday): 32483.8 (Mar 23) : 2018 Low (intraday): 9951.9 (Mar 23)
2017 High (intraday): 34005.37 (Dec 26) : 2017 High(intraday): 10515.10 (Dec 26)
End
Edited by Michael Correya
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Source: Cogencis
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