Metals drag markets; Vedanta, Hindalco tank

Volatile Indian stock markets turned negative in the afternoon session dragged down by the Metal stocks. Metal index drowned 5.7 per cent pulling the benchmark indices down by more than 1 per cent at 14:45 hours. Vedanta and Hindalco led the move falling more than 13 and 10 per cent, respectively.

The nosedive in the Metal index was in the wake of a nearly 4 per cent fall in the Chinese markets after its central bank cut the minimum reserve requirement for the banks last Friday. Current Reserve Requirement Ratio (RRR) stands at 15.5 and 13.5 per cent for large commercial banks and small lenders, respectively. People’s Bank of China announced a 100 bps cut in the RRR w.e.f October 15. The move is was amid concerns about the ongoing tariff war with the US.

Earlier, we had indicated a multiple point downward sloping trendline breakout for the metal followed by a consolidation up to September end. The index broke down from its consolidation level on September 28 and fell below the trendline. In case, the index sustains above the trendline level of 3,375 on a closing basis in the near term, we can say that the index witnessed a pullback and is set for an upside rally. The index took a support at 3,230 levels. In case, it falls below the level, we may see 3,060 soon.