Shares of major Indian metal companies witnessed a strong rebound during Thursday's intraday trading session, recovering from recent losses. This surge was powered by a significant overnight rally in global base metal prices, which itself was triggered by a sharp decline in the US dollar.
Dollar Weakness and Fed Rate Cut Bets Fuel Rally
The primary catalyst for the metals rally was a substantial drop in the US Dollar Index. This index, which measures the dollar's strength against six major currencies, fell by 0.49% to close at 98.86 on Wednesday. This marked its ninth consecutive session of losses, hitting the lowest level since October 29.
A weaker dollar makes commodities priced in the US currency cheaper for international buyers, boosting demand. The dollar's slide accelerated after recent US payroll data showed companies shed jobs in November at the fastest pace since early 2023. This reinforced market expectations that the Federal Reserve may cut interest rates at its upcoming policy meeting.
According to the CME Group's FedWatch tool, fed funds futures now indicate an 89% probability of a 25-basis-point rate cut at the Fed's December 12 meeting, up from 83.4% a week earlier.
Stock Performance and Record-Breaking Copper
The buying interest was broad-based across the Nifty Metal index. Hindustan Copper jumped 6.6% to hit an intraday high of ₹361.80 per share. Other major gainers included:
- Vedanta
- Adani Enterprises
- National Aluminium
- SAIL
- NMDC
- Hindalco Industries
These stocks traded with gains ranging from 0.50% to 1.3%.
The rally in equities mirrored the explosive movement in underlying commodity markets. Benchmark three-month LME copper hit a record high of $11,540 per ton on Wednesday. Although it moderated slightly to $11,497 on Thursday, copper is poised for its largest annual gain since 2017, having risen 31% so far this year.
Copper's surge was driven by a dual force: the falling dollar and concerns over a global supply squeeze. Shipments were reportedly accelerated to the US ahead of new tariffs, tightening immediate availability.
Broad-Based Gains Across the Metals Complex
The bullish sentiment was not confined to copper. Other base metals also registered strong gains on the London Metal Exchange:
- Tin climbed 4.2% to $40,675 a ton, after touching its highest level since May 2022.
- Aluminium rose 1.1% to $2,897 a ton.
- Zinc held steady at $3,063.
- Lead edged up 0.1% to $1,997.50.
- Nickel advanced 0.6% to $14,895.
The strong rally in base metal prices this year is supported by a confluence of factors: expectations of US Federal Reserve rate cuts, the weakening dollar, and improving growth prospects in China. Additional support has come from supply disruptions, policy changes, and increased capital expenditure in sectors like aluminium.
Investors are now awaiting the delayed release of US September PCE data on Friday for further clues on the monetary policy trajectory. Geopolitical tensions, with US-Russia talks on Ukraine concluding without a breakthrough, also added a risk premium to commodity prices.
