The Indian stock market witnessed a significant sectoral correction last week, with metal stocks bearing the brunt of the selling pressure. The Nifty Metal index tumbled nearly 3%, snapping its two-week winning streak and marking its most substantial weekly decline since mid-November. This sell-off occurred paradoxically against a backdrop of continued strength in global commodity prices for both base and precious metals.
A Sharp Reversal for Metal Equities
From its record high of 11,652 points reached on January 6, the Nifty Metal index has now retreated by approximately 5%. The downturn was broad-based, with six out of the index's fifteen constituents closing the week with heavy losses. Jindal Stainless led the decline, plummeting 9.7%. It was followed by Welspun Corp, Jindal Steel, Lloyds Metals & Energy, Adani Enterprises, and NMDC, all of which posted losses between 5% and 6.5% for the week.
Analysts point to profit-booking as a primary catalyst. The recent sharp run-up in share prices had driven valuations to levels deemed unsustainable by many investors, prompting them to lock in gains. This technical correction kept the sector out of favour despite supportive underlying commodity trends.
Global Headwinds and Commodity Divergence
Adding to the negative sentiment were renewed fears of global trade tariffs. Remarks from former US President Donald Trump targeting Russia, China, and India sparked concerns. Trump specifically warned of imposing higher tariffs on Indian exports if India continued purchasing Russian oil. A bipartisan US bill, which has Trump's backing and awaits congressional approval, proposes tariffs as high as 500% on countries buying Russian oil. Such protectionist measures could hurt global economic growth, dampening demand outlook for industrial metals.
Interestingly, this stock market weakness contrasted with robust trading on commodity exchanges. On the London Metal Exchange (LME), copper prices extended their weekly winning streak to four weeks, surging 4.07% to $13,012 per metric ton on bets for future demand. After rising 42% in 2025, copper hit a record high of $13,387.50 on Tuesday, its biggest annual gain since 2009. Other base metals also advanced: tin rose 13%, nickel gained 5%, aluminium was up 2%, lead increased 4%, and zinc added 0.5%.
In the precious metals space, softer US jobs data bolstered expectations for Federal Reserve rate cuts, triggering a Friday rally. Spot silver and gold prices ended the week higher by 10% and 4.10%, respectively. On the MCX, the gains were even stronger, with silver and gold finishing up 7% and 2.25%, respectively.
Analysts Foresee Muted Q3FY26 Earnings
The near-term outlook for metal companies remains cautious, with analysts anticipating a moderation in December quarter (Q3FY26) results. Weak realisations and rising raw material costs are expected to pressure profitability, raising concerns that the pain for metal stocks may persist.
Domestic brokerage Axis Direct expects a moderation in absolute EBITDA and margins across the steel and aluminium companies it covers. For Tata Steel and SAIL, it estimates a quarter-on-quarter (QoQ) decline in EBITDA, primarily due to lower steel price realisations and higher coking coal costs, partially offset by higher sales volumes.
Aluminium majors like Hindalco and NALCO are also likely to report slightly muted EBITDA sequentially. Hindalco's performance may be impacted by lower EBITDA from its subsidiary Novelis, while NALCO could be affected by lower alumina sales volumes and prices. However, the brokerage noted that strong aluminium prices and lower coal costs might offer some support.
JM Financial estimates that operating profit across its metals coverage could decline by around 5% QoQ, driven by the same twin pressures of weaker realisations and rising input costs. Motilal Oswal expects ferrous companies under its coverage to see EBITDA dip 9% QoQ due to weak net sales realisations and higher coal costs. In a brighter spot, non-ferrous firms may post 5–18% QoQ growth in revenue, EBITDA, and profit after tax (PAT), supported by healthy volumes.
Mining companies, however, are likely to report strong earnings on volume recovery. Coal India, NMDC, and Midwest are expected to post notable quarterly gains, providing a divergent trend within the broader metals and mining landscape.
