Nifty Metal Drops 3% Due to Weak US and China Manufacturing Data; JSW Steel and Tata Steel Lead the Fall

Indian markets struggled today, losing over 1% after a record performance in the previous session. This drop was influenced by a global sell-off due to weak US manufacturing and labor market data, raising fears of a recession.

The metal sector was hit hardest, with the Nifty Metal index falling nearly 3% to 9,301 points. All 15 index constituents were in the red, with JSW Steel down 3.2%, followed by Tata Steel, Hindalco Industries, and NALCO, which lost 2.5% to 3%.

Metal Demand Concerns

Prices of key industrial metals like copper, aluminum, steel, and zinc have been declining. Copper, a key economic indicator, is trading at $9,030 per metric ton on the London Metal Exchange, down 18% from its May peak. This drop is due to low demand, high inventories, and no new stimulus from China for its housing sector.

Weak manufacturing data from the US and China has added to metal demand concerns. The US ISM manufacturing index showed a contraction, and China’s factory activity also fell in July. The Chinese government is focusing on advanced technologies and new energies instead of boosting its manufacturing sector.

The drop in the ISM manufacturing index and a rise in US jobless claims have increased fears of a recession. These weak data points came after the Federal Reserve kept interest rates at their highest in two decades, with a possible rate cut hinted for September.

Investors are now waiting for the US monthly payrolls report to assess the health of the world’s largest economy. The Nifty 50 fell by 1.14%, reaching 24,726, while the Sensex declined by 1%, hitting 80,995 points.

Profit Booking Time?

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented, “The sharp dip in the US ISM Manufacturing index has brought back recession fears. The Indian market, supported mainly by money flows rather than fundamentals, may see some profit booking, especially in mid and small caps.”