Metal stocks plunge with commodities; chance for a contra bet?

NEW DELHI: The rally in the commodity-linked stocks has fizzled out, as was evident in the deep cuts seen in the shares of Vedanta and Hindalco, among others, in Wednesday’s trade.

Shares of Jindal Steel, Vedanta, Hindalco, Tata Steel fell as much as 7 per cent in morning trade as the surge in the commodity markets petered out overnight. The BSE Metals index, a gauge of metals stocks trading on the BSE, slipped nearly 2 per cent.

Investment bank Goldman Sachs termed the rally in commodities as one based more on sentiment and maintained its bearish outlook for this space. The investment bank expect the rally from iron ore to gold and aluminium to reverse in the next few days as any spike in the prices will only invite further supplies to the market.

Globally, stocks of major commdity linked stock plunged as much as 17 per cent overnight. Glencore slipped 17 per cent, Rio Tinto 10 per cent, Vale 13 per cent, BHP Billiton 9 per cent and Arcelor Mittal 8 per cent.

At 9:41 am, Vedanta was trading 5.37 per cent lower, Jindal Steel fell 5.58 per cent, Hindalco 3.61 per cent, SAIL 3.46 per cent and Tata Steel 3.2 per cent.

“For the short-term trader, the rally is done for now. From a medium to long term view if I have to take any correction from here on or even at the current level it is still time to take a good contrarian buy call in the metal stocks,” said Kunj Bansal, ED & CIO, Centrum Wealth Management.