Several metal stocks have seen significant pressure in early trade on Budget Day today. The sell-off came after the precious metals crashed to historic lows. Shares of Hindustan Copper have plunged 15% while Multi Commodity Exchange of India hit a 10% lower circuit.
Meanwhile, on MCX, Gold’s future contracts with April delivery hit a 9% lower circuit at Rs 1,38,638, while Silver hit a 9% lower circuit at Rs 2,65,652. Speaking on the sharp selloff in select metal stocks, Siddharth Khemka of Motilal Oswal Financial Services said, “The correction is significantly driven by sentiment. I think this is a good pullback, which is happening. This will ensure the excesses in these prices come off to a large extent.”
MCX shares hit lower circuit
The share price of Multi-Commodity Exchange hit the 10% lower circuit as soon as it opened. The stocks fell to a low of Rs 2,275.20, freezing in the lower circuit. The fall in the bourse’s stock prices came after the Gold and Silver rate retreated sharply from their all-time highs on Friday. Silver rate plunged 30% on COMEX in the international market. Silver prices dropped below $100 per ounce, ending a strong rally after rising about 63% in January.
MCX’s share price has declined by over 8% in the past five trading sessions. The stock has fallen 2% in the last one month. However, the stock has given a return of 45% in the past six months. The stock has given almost multi-bagger returns over the last 12 months.
Hindustan Zinc hits lower circuit
Not just MCX, the country’s largest silver miner, Hindustan Zinc, also nosedived to hit the lower circuit and halted trading at Rs 565.65 on the National Stock Exchange. The stock plunged 10% as soon as the markets opened. Its market capitalisation dropped by Rs 63,000 crore in two days.
The share price of Hindustan Zinc has erased 22% of investors’ wealth in the past five trading sessions. The stock has declined by over 10% in the past one month. However, it has given a return of 32% in the last six months. Hindustan Zinc’s stock price has surged 26% in the previous 12 months.
Hindalco, following the same downtrend, fell 10% to the day’s low of Rs 866.35. The counter lost Rs 25,000 crore of market capitalisation in the last two days.
Gold and Silver
In the month of January, Gold surged nearly 28%, marking only the second such monthly gain in the last 100 years, the previous instance being January 1980. Silver rallied nearly 70%, the strongest monthly performance in its recorded history. Such extraordinary gains, however, often attract speculative excess—making corrections not just possible, but inevitable, said Ajay Kedia of Kedia Advisors.
“There has been a big crash in gold and silver prices. The crash in silver, particularly, is huge. This means unwinding of many positions in the MCX and perhaps much lower volume of trades, going forward. Investors who jumped onto the gold and silver ETFs are likely to stop their SIPs in these schemes. The silver trade has been a purely speculative trade. As far as gold is concerned, safe haven buying will emerge at a lower level,” said V K Vijayakumar, Chief Investment Strategist of Geojit Investments.