Shares fall, crude oil, metal prices rise

Indian stocks fell on Wednesday, while oil and commodity prices hit multi-year highs, as the war in Ukraine and sanctions on Russia continued to hit the markets.

Taking cues from global indices, Nifty and Sensex fell 1.12% and 1.38%, respectively.

Crude oil continued to rise. According to data from Bloomberg, the May contract price of Brent crude on the Intercontinental Exchange (ICE) was $113 at 7.30 pm. This is the highest level of Brent crude oil prices since 2014. West Texas Intermediate (WTI) also crossed the $110 per barrel mark. Its April futures contract on the NYMEX was up 7.90% at $111.31 a barrel, its highest level since 2013.

The jump in oil prices came despite the International Energy Agency’s (IEA) member states’ decision to release 60 million barrels of oil from their emergency reserves. The US also announced the exploitation of its strategic petroleum reserves.

This is adding to substantial concerns about inflation in India, even as economic growth slowed to a lower-than-expected 5.4% in the December quarter. “This slowdown is likely to extend further. As things stand now, India’s GDP growth for FY23 will be lower and inflation will be higher than expected,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. This is negative for the stock market.

Base metals aluminium, copper, zinc and lead have risen 3.6-15% in the past month on the London Metal Exchange, with aluminum leading the way. Notably, aluminum prices, which have risen more than 58% in the past year, are at multi-year highs.

Analysts say international sanctions on major metal producers in Russia could put further pressure on the tough aluminum market. The supply of aluminum was already affected due to closure of many smelters due to high energy cost. China saw the smelter shut down even after its initiatives to reduce electricity and carbon emissions.

“As the conflict escalates, base metal prices could make more short-term climbs, and nickel and aluminum prices are already climbing,” Credit Suisse analysts said in their February 28 report. The immediate concern would be whether any cuts in Russian exports would cause the shortfall, he said. However, he added that if commodity exports are unaffected, prices should fall later as there is more to demand through a potential slowdown. There will be risk.

Shares of Hindalco Industries Ltd, National Aluminum Company Ltd (Nalco), Vedanta Ltd touched a new 52-week high on Wednesday, having gained 73-112% in the past one year.

The Russian invasion of Ukraine could also mean higher steel prices in Europe due to supply disruptions. Analysts at Nomura Research said that “the most affected region is Western Europe, which accounted for 21% of its imports from these countries in CY21. Economic sanctions on Russia could affect supplies to Europe, potentially increasing the risk of high demand in the region.” Can move on to pricing.

However, it may provide an opportunity for Indian manufacturers to increase exports to Europe. New opportunities can open up in Asia as well.

Analysts at Edelweiss Securities Ltd said that “in terms of domestic players, we see a positive impact as Russia has emerged as a regional steel price determiner in South-East Asia. If Russian exports are cut, the ongoing maintenance Coupled with the activities focused on reducing exports of Far East mills and China steel, we can see Indian steel mills like JSW Steel and Tata Steel gaining an edge in the export market.

Rising costs still face some challenges due to the rise in the prices of raw materials such as iron-ore and coal. Domestic steel prices are being watched due to weak domestic demand.

Metal stocks were the top gainers, followed by energy and media. However, the rest of the sectors ended the day in the red.

Siddharth Khemka, Head Retail Research, Motilal Oswal Financial Services Ltd., said, “Voltality is expected to remain high in the near term given the Russia-Ukraine conflict, upcoming state election results as well as the US Fed meeting.” He added that keeping energy prices high for a longer period of time could affect margins and earnings.

The government is closely monitoring the geopolitical situation and its economic repercussions. On Wednesday, Prime Minister Narendra Modi met External Affairs Minister S. Jaishankar, Commerce and Industry Minister Piyush Goyal, National Security Advisor Ajit Doval, Foreign Secretary Harsh Vardhan Shringla and Principal Secretary to Prime Minister PK Mishra held a high-level meeting. To discuss the evolving situation.