The metal stocks index is currently the top sectoral gainer. A weaker dollar improves global demand for commodities which in turn benefits Indian metal producers through export opportunities and better pricing.
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Shares of metal companies were sharply higher on September 3, extending gains on weaker dollar and taking the Nifty Metal index higher by more than 1.5 percent in mid-day trade to extend gains for a third session.
Tata Steel, Hindustan Copper and Welspun Corp are the top gainers on the index, rising nearly 3 percent each, while NALCO, SAIL and Jindal Steel & Power shares rose more than 2 percent each. Vedanta, JSW Steel and NMDC shares gained nearly 2 percent each, whereas Hindalco Industries shares were up over a percent.
Here are some key factors driving the stocks higher:
- 1 Weaker Dollar
- 2 China’s Plan to Cut Steel Output
- 3 GST Reform Hopes
- 4 US Fed Rate Cut Hopes
- 5 Strong Q1 GDP
- 6 FAQs on Metal Stocks Rally (September 3)
- 6.1 Q1. Why are shares of metal companies rising on September 3?
- 6.2 Q2. Which metal companies are the top gainers today?
- 6.3 Q3. How does a weaker dollar benefit Indian metal companies?
- 6.4 Q4. What is the impact of China cutting steel output?
- 6.5 Q5. What role do GST reforms play in this rally?
- 6.6 Q6. How could US Fed rate cuts affect Indian metal stocks?
- 6.7 Q7. How does India’s strong GDP growth support metal stocks?
- 6.8 Q8. Which brokerage firms are positive on metal stocks?
Weaker Dollar
The US dollar has seen recent weakness after one report by DBS said, quoted by Reuters said that Trump’s appointments to the Fed are likely to further weigh on the dollar. “Already, the labour market is softening, and Chair Powell has signalled the possibility of rate cuts at Jackson Hole,” the note said. “This means that the overvalued USD could ease again as markets anticipate coming Fed rate cuts.”
A weaker dollar improves global demand for commodities, like metals, which in turn benefits Indian metal companies through higher export opportunities and better pricing.
China’s Plan to Cut Steel Output
China has plans to cut steel production between 2025 and 2026, according to an official document reviewed by Reuters, in an effort to tackle overcapacity. A reduced steel output from China will likely lower dumping of cheap metals into the Indian market, which in turn could benefit Indian metal players. CLSA said it expects the spreads to improve and Indian mills to see a rise in their profitability.
CLSA tweaked FY26-28 EBITDA estimates for metals and mining companies under its coverage by -4 percent to +8 percent. It noted that it continues to favour aluminium, given tighter demand-supply balance.
GST Reform Hopes
The GST Council, chaired by Finance Minister Nirmala Sitharaman, is meeting in New Delhi on September 3-4 to deliberate on the Centre’s proposal for a simplified two-rate structure of 5 percent and 18 percent. “GST reforms and rate cuts together can spur growth by lowering compliance costs, improving efficiency, and boosting affordability. Reduced GST on housing or construction inputs supports real estate demand, while cheaper financing from rate cuts aids both homebuyers and capital-intensive industries like metals,” said Pranay Aggarwal, Director and CEO of Stoxkart.
US Fed Rate Cut Hopes
US Federal Reserve Chair Jerome Powell on August 22 had said that a weaker job market may soon force the American central bank to cut interest rates. “Downside risks to employment are rising,” according to Powell’s remarks at the Jackson Hole Economic Policy Symposium, last month.
Most investors now expect a 25 bps Fed rate cut during its upcoming meeting on September 16-17. A rate cut in the US could reduce borrowing costs for foreign investors, encouraging them to invest in higher growth markets such as India, potentially boosting metal stocks.
Strong Q1 GDP
Indian economy grew 7.8 percent in the June quarter, beating RBI’s 6.5 percent projection and the 6.6 percent median recorded in a Moneycontrol poll. A stronger GDP growth may spur confidence in Indian economy’s growth, which in turn can boost the metal stocks.
“While domestic demand remains subdued, the market is pinning its hope on post-monsoon recovery, government capex, and GST recalibration. Recent developments would lead to a tighter pricing range, adding duration to earnings and potentially boosting valuation,” said Emkay Global while noting that its key picks in the sector are Tata Steel and SAIL.
FAQs on Metal Stocks Rally (September 3)
Metal stocks are gaining due to a weaker US dollar, China’s plan to cut steel output, hopes of GST reforms, expectations of US Fed rate cuts, and strong Indian GDP growth.
Q2. Which metal companies are the top gainers today?
Tata Steel, Hindustan Copper, and Welspun Corp are leading the gains with nearly 3% rise each. NALCO, SAIL, and Jindal Steel & Power are up over 2%, while Vedanta, JSW Steel, NMDC, and Hindalco also gained.
Q3. How does a weaker dollar benefit Indian metal companies?
A weaker dollar makes commodities cheaper globally, boosting demand. This helps Indian metal exporters with better pricing and higher export opportunities.
Q4. What is the impact of China cutting steel output?
China’s plan to reduce steel production between 2025–26 will lower excess supply in the global market. This can reduce dumping of cheap metals in India, improving profitability for Indian steelmakers.
Q5. What role do GST reforms play in this rally?
The GST Council is considering a simplified two-rate structure (5% and 18%). Lower GST on housing and construction inputs may support real estate and infrastructure demand, which indirectly boosts the metal sector.
Q6. How could US Fed rate cuts affect Indian metal stocks?
A Fed rate cut reduces borrowing costs for global investors. This may drive more foreign investments into emerging markets like India, benefiting metal companies.
Q7. How does India’s strong GDP growth support metal stocks?
India’s 7.8% GDP growth in Q1 (above RBI’s forecast) boosts investor confidence in the economy. Stronger growth means higher demand for metals in infrastructure, housing, and manufacturing.
Q8. Which brokerage firms are positive on metal stocks?
CLSA expects spreads to improve for Indian mills and continues to favor aluminium. Emkay Global has picked Tata Steel and SAIL as its key recommendations in the sector.