Metal stocks surged on Monday on hope of a turnaround in the Chinese economy as the central bank of China cut its benchmark interest rate by 25 basis points. China is the world’s biggest consumer of industrial metals and the state of its economic activity has a direct bearing on global metal prices.
The BSE metal Index closed 250.42 points, or 2.52%, higher at 10,202.97, one of the best sectoral gainers on the BSE. The broader Sensex closed at 27,507.30 points (up 1.48%). While the shares of aluminum producer Hindalco Industries climbed to a two-month high, Tata Steel and Vedanta rose for the first time in four days. Among the metal stocks, Vedanta and Hindalco witnessed a surge in trading volume. Both saw a combined volume of over 80 lakh shares on the BSE and the NSE.
As the Chinese economy struggles to keep its momentum, this is a third rate cut by the People’s Bank of China in the last six months. On Monday, it reduced one-year deposit rates by 25 bps, effective May 11. After emerging as the key economic driver of the world, the Chinese economy has slowed down in the last five years.
For the January-March quarter, China’s GDP grew at 7%, its slowest quarterly growth in six years. Slowdown in industrial activity and the housing market have weighed, leading to a slump in the country’s shipment orders. In April, China’s imports declined 16.2% y-o-y, raising hopes of stimulus by the officials.