Metal Stocks Rally On US Tariffs, Awaits CPI, IIP Data | CORPORATE ETHOS

Metal Stocks Rally On US Tariffs, Awaits CPI, IIP Data

By: | March 10, 2018
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Week that was…

Market continued to be under pressure on concerns impending global trade war, extension of PSU NPA worries and rise in bond yields. The sell-off in domestic market was broad based and Nifty touched a low of 10150 level, losing 1% this week. FIIs are pulling out money given negative cues from both domestic as well on global front.

This week consolidation in market was led by headwinds on account of US government’s plans to impose tariff on imported metals leading to volatility in global markets. Metals stocks were under pressure as imposition of tariffs in the US could distort the domestic market considerably by raising the threat of imports and Nifty Metal index declined by 4% this week. An improvement in macros like GDP & IIP and extension of political strength of central party in North-East state elections, failed to cheer market. Further, investors were concerned about the continuation of NPAs and fraud in banking sector. The increase in cost of borrowing, reduction in credit growth and further write downs due to NPA are leading to downgrades in the sector. PSU Bank index was the key underperformer, declined by 5%. The introduction of LTCG, scam in PNB, repeated signals from the US Fed to hike interest rates rapidly and possibility of downgrades of India weightage from MSCI index are the key factors which is turning FIIs cautious on domestic market. The selling in Mid & Small cap continued due to sharp run-up and on concerns of valuation. Pharma sector continued to underperform due to USFDA issues, declined by 4% this week. However, Nifty continued to take support at 200DMA as DIIs were net buyers on expectation that the global headwinds somewhat factored in this consolidation.

Week ahead…

Absence of major triggers to maintain the upward trend is keeping investors to stay on sidelines. Though long term outlook for the domestic economy continues to be strong while global trade headwinds, NPA issues and FEDs rate hike trajectory is adding volatility in market. Market participants are cautiously awaiting CPI & IIP data next week. Inflation is expected to come down to 4.74% in February which will ease bond yield in the near term. IIP is expected to show some moderation.

Mr Vinod V Nair is Head of Fundamental Research, Geojit Financial Services Ltd.