The NSE metal index gained almost 3% as ferrous and nonferrous manufacturers saw sharp rise in their share prices. Share prices of Tata Steel , JSW Steel and Jindal Steel and Power gained up to 4% while Steel Authority of India Ltd saw its share price rise almost 6% on news flow around China Central Bank to cut reserve ratio requirement and boost economic growth.
The People’s Bank of China (PBOC) has decided to cut the reserve requirement ratio (RRR) for all banks by 50 basis points (bps) in February to boost the economic growth. The uptick in Chinese economy can provide strong boost to demand for metals with China being the largest consumer of commodities globally. The rise in China internal Consumption demand will also mean that exports from China in the global markets may also decline, providing support to the international metal prices.
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Not surprising that while share prices of Steel manufacturers gained, those of Aluminium and other base metal producers as National Aluminium Co. Hindustan Copper gained up to 7% while Hindalco Industries Ltd saw its share price rise almost 5%
The hopes had remained high on metal demand getting a boost in 2023 post China eased its Covid restrictions and opened up its economy. The demand however disappointed with slowing Chinese economic growth amidst the real estate crisis.
Hence China Central Banks efforts to cut the amount of cash that banks must hold as reserves, as a step to boost economic growth has been welcomed by investors.
A 50 basis points cut to the reserve requirement ratio (RRR) is expected to inject 1 trillion yuan ($140 billion) of liquidity into the market, suggest news reports.
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The Steel prices that have been under pressure globally due to high China exports can get a boost if China exports reduce and China internal demand catches pace. Indian manufacturers whose export volumes are suffering may also see some recovery
The raw material used in steel making as iron-ore and Coal can also get demand boost if China production catches pace. Not surprising share prices on NMDC Ltd gained almost 5% and Coal India also gained 2%.
Als
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Published: 24 Jan 2024, 04:24 PM IST