The Nifty Metal index slipped to around 11,726 during the morning session after gaining more than 6 percent over the previous three trading days. The recent rally had pushed several metal stocks to short-term highs, prompting investors to lock in profits.
Market participants noted that the correction was largely technical in nature, following a sharp run-up in prices. However, global cues and commodity market movements amplified the pressure on metal counters.
Hindustan Zinc, Vedanta Lead Losers
Hindustan Zinc emerged as the top laggard in the sector, with its shares tumbling around 7 percent to slip below the ₹600 mark. The stock had gained steadily over the past few sessions before Thursday’s sharp reversal.
Vedanta shares declined nearly 5 percent, while NALCO fell close to 4 percent in early trade. Hindalco Industries and Hindustan Copper also saw losses of around 3 percent each, reflecting broad-based selling across non-ferrous metal stocks.
Among other names, NMDC and Lloyds Metals and Energy were down about 2 percent. Steel stocks were not spared either, with SAIL and Tata Steel shedding over 1 percent, while JSW Steel and Adani Enterprises also traded in the red.
Profit Booking at Elevated Levels
One of the key reasons behind the decline was profit booking by investors after the recent surge in metal stocks. The Nifty Metal index had climbed sharply in the past week, supported by expectations of improved demand and stable domestic fundamentals.
With valuations turning attractive for sellers in the short term, traders chose to pare exposure, leading to a sharp intraday correction. Analysts believe such pullbacks are common after strong rallies and help cool overheated segments of the market.
Stronger US Dollar Weighs on Metals
Another major factor impacting metal stocks was the strength in the US dollar. The dollar index edged higher as global markets awaited interest rate decisions from major central banks, including the European Central Bank and the Bank of England.
A stronger dollar typically makes dollar-priced commodities such as metals more expensive for overseas buyers. This can dampen global demand expectations and put pressure on metal prices, eventually affecting the share prices of metal producers.
Sharp Fall in Gold and Silver Prices
Precious metals also saw heavy selling, adding to the negative sentiment. Gold futures declined around 3 percent, while silver futures plunged nearly 6 percent in domestic markets. The sharp fall raised concerns over near-term earnings prospects for companies with exposure to precious metals.
Several listed metal companies, including Hindustan Zinc, have significant exposure to silver and related commodities. The decline in prices of these metals is expected to weigh on margins if the trend persists.
Outlook Remains Cautiously Optimistic
Despite the sharp fall, market experts believe the long-term outlook for the metal sector remains linked to global growth trends, infrastructure spending and domestic demand. Investors are advised to track global commodity prices, currency movements and policy cues closely.