why is Tata steel volatile now?

why is Tata steel volatile now?

on Friday, the share price of Tata Steel — one of India’s largest steel companies by market cap at ₹1.66 lakh crore — fell by a whopping 8.9%. it wasn’t alone as the share prices of JSW steel dropped 7.2%, Jindal Steel dropped 8.1%, SAIL dropped 8.7%, among many others. it was a poor day for metal stocks overall, reflected by the 6.4% drop in their sectoral index.

such slides are usually precipitated by poor earnings results, a sudden change in leadership, or even regulatory troubles. but in this instance, it was due to overseas tidings which may dictate the direction that the global economy takes.

China slows down

commodities had a rough week on the global markets, and not just in India. metals in particular are under fire on uncertainty over growth in demand. China, their largest consumer, has recently implemented lockdown measures to contain an outbreak of Covid-19 and is cracking down on its industries. it is also urging its steel mills to cut their outputs, leading to a rise in prices due to a shortage of supply. crude oil also dipped 7% last week to three-month lows.

all these indicators led to falling stock markets as investors began to read into signs of an economic slowdown.

Fed tightens the tap

last Wednesday, the minutes of the US Federal Reserve officials’ July 27-28 meeting were made public. they indicate that the Fed might start tapering its stimulus as early as in the final months of this year, if not in the initial months of 2022. at present, the US is grappling with inflation rates at a 13-year high. 

there is also the possibility of interest rates being hiked earlier than the Fed’s 2023 estimate. this would make credit more expensive to obtain, and thus restrict the easy flow of money. all these together led to jitters in the

but it was a week that also saw the US S&P 500, as well as the Indian Sensex and Nifty hit their lifetime peaks. n fact, US markets actually had a pretty green Friday as the Fed moved to ease concerns on the timeline of the taper. in the coming week, they are meeting once again, virtually, for their annual symposium, which will likely shed more light on the topic. 

until that happens the metal sector and those allied with it might be in for a slightly more subdued ride.