US President Trump’s increasingly hawkish threat against China and Mexico could have massive repercussion over the global economy as well as developing the economy. As of now, the US slapped a 25% tariff on $250 billion of Chinese goods and 5% on all Mexican exports to the United States. Because these doldrums Crude oil has been dipped, bullions prices rose and metals have been sharply fallen.
Meanwhile, the domestic equity market also hammered due to this prolonged tariffs drama for this reason metal index has been undermined amongst all sectors, which has expected to create pressure on base metals and it is expected to continue in the near term. It has been observed that in the last eight weeks, earnings of metal companies have posted weak numbers in the Jan-Mar quarter. The operating profits of steel production companies fell to 12-15% in the March quarter, namely JSW Steel who posted 48% decline in PAT on YoY basis and Hindalco reported 37% drop in net profit on a yearly basis. Though the companies chairmen are positive about the outlook of the industry stated that increasing demand in India of aluminum, copper, and steel would boost the growth of metals by 6-8% for FY2020 and add on factor is back of Modi government, which building positive sentiments in the market.
However, the real estate sector is typically dependent due to base metals and steel, which remains in a downtrend.
As metals are losing their shine an investor should stay away from these fake glitters of their lower valuations.