Dragon fire cools down metal stocks

Mumbai, Oct 29 | Updated: Oct 30 2004, 05:30am hrs
Metal stocks took a severe beating on The Stock Exchange, Mumbai (BSE) on Friday following concerns over a sharp fall in metal prices after China hiked interest rates in an effort to cool down its economy.

Sharmila Joshi, head of institutional dealing, Asit C Mehta Investments Intermediates said: The rise in interest rate might take its toll on metal prices.

On Thursday, China announced a hike in domestic lending and deposit rates in an effort to cool down its economy. The rate on one-year deposit was increased to 2.25% from 1.98%. While the benchmark rate on one-year yuan loans was raised to 5.58% from 5.31%.

As a result, the BSE Metal Index witnessed a sharp fall on Friday, losing 2.52% or 125.40 points at 4,853.77. After opening at 4,959.20 (incidentally its intra-day high), down 19.97 points from its previous close of 4,979.17. Thereafter, the BSE Metal Index slipped further into the red to touch an intra-day low of 4,831.11, before closing the day at 4,853.77

All the stocks listed on the BSE Metal Index (aluminium, steel, copper, sponge iron makers and iron ore makers) lost ground on Friday. Tata Steel, Sterlite Industries, Sesa Goa, National Aluminium, Hindalco, Hindustan Zinc, Sail, Saw Pipes and Jindal Stainless were major losers. These companies lost in the range of 1.5% to 4.61%.

Jigar Mistry, metal analyst, PL Securities, said: This is the first time that China has taken a concrete step to slowdown its economy. This in turn brought down the metal stocks on Friday. It is feared that Chinas move to hike interest rates would ease the demand and the prices for both ferrous and non-ferrous metals. China has been one of the major demand drivers for metals such as copper, steel and aluminum.