Today Indian market saw a rampant buying in metal stocks , both ferrous and non ferrous , but what was the reason behind it . Lets understand.
The international market has seen sell of in the metals sector owing to the strong dollar currency and drop in demand due to chinese lockdowns. But it seems dollar has overshooted its long term mean value and is set to correct in the short term. With FED rethinking on more rate hikes , the metals sector may see rampant demand in next few weeks as manufacturing industries will try to take advantage of the expected fall of the dollar in coming weeks.
Recently when 1 USD = 1 EUR , we saw quick correction and sell off in USD brining it back to 0.97 levels in 2 days of trading. If the dollar depreciates , steel and aluminum stocks will fire the most as they saw maximum beating in the recent sell off.
We recommend to have a trading position with a cautious Stop loss of around 3.5 % on position basis for stocks such as TATA STEEL , VEDANTA and HINDALCO. These stocks may return over 20% in coming 2 to 3 weeks as dollar continues to cool off.
Prices at the time of writing this article : TATA STEEL : 904, VEDANTA : 237 , HINDALCO : 367