Sectoral Vulnerability in Indian Equities: Navigating Metal and IT Stock Underperformance Amid Global Trade and Commodity Headwinds

In 2025, Indian equities faced a complex landscape of global trade uncertainties and commodity price volatility, leading to divergent performances across sectors. While the broader market lagged behind global peers-posting single-digit gains for the Nifty and Sensex-certain sectors, like metals, exhibited resilience amid headwinds. Conversely, the IT sector, a traditional growth driver, faltered under shifting capital flows and geopolitical pressures. This analysis examines the root causes of underperformance in these sectors and outlines actionable strategies for investors to mitigate risks.

Metal Sector: Paradox of Global Gains and Domestic Pressures

The Indian metal sector demonstrated relative strength in 2025, compared to weaker performances in consumer and technology sectors. This resilience, however, masked underlying vulnerabilities. Global base metals like copper and aluminum rallied due to supply constraints and a weak U.S. dollar, with prices , respectively. Yet, Indian steel producers faced a five-year low in domestic prices, driven by oversupply, extended monsoons, and competition from Chinese exports.

Key challenges include:
1. Import Pressures: A surge in steel imports from China, Japan, and Vietnam forced the Indian government . While this measure stabilized prices temporarily, it highlighted the sector's exposure to global trade dynamics.
2. Domestic Demand Weakness, demand growth slowed in 2025 due to muted infrastructure spending and GST 2.0 transition challenges.
3. LME Price Volatility: Fluctuations in London Metal Exchange prices directly impacted export revenues and domestic pricing, creating margin pressures for producers.

IT Sector: Shifting Capital and Trade Turbulence

The Indian IT sector, a cornerstone of the economy, underperformed in 2025 amid global trade headwinds. The Nifty IT index lagged behind broader market gains, with companies like Infosys and TCS struggling to meet earnings expectations. Key factors include:
1. Capital Reallocation: A global shift toward artificial intelligence and tech innovation diverted investment away from traditional IT services.
2. Trade Uncertainties: U.S.-India trade deal negotiations and geopolitical tensions, such as the Iran-Israel conflict, created an environment of regulatory and tariff risks.
3. High Valuations and Earnings Mismatches, as high equity valuations failed to align with tepid earnings growth.

Investor Risks and Hedging Strategies

For investors, the underperformance of these sectors underscores the need for proactive risk management.

Metals Sector: Hedging Commodity and Currency Volatility

• Local Hedging Tools: Indian commodity exchanges like MCX introduced refined contracts for nickel and zinc, enabling SMEs and corporates to hedge against price swings.
• AI-Driven Forecasting: Advanced analytics and machine learning tools are being deployed to predict commodity price trends, optimizing derivative strategies in volatile markets.
• Export Diversification: Producers are pivoting to European and Southeast Asian markets to reduce reliance on domestic demand and mitigate import competition.

IT Sector: Mitigating Trade and Talent Risks

• : Leveraging agreements like India–EFTA and India–UK FTAs has reduced dependency on the U.S. market and enhanced access to value-added manufacturing opportunities.
• Logistics Modernization: Initiatives like are streamlining supply chains, improving competitiveness in global value chains.
• Talent Retention Strategies: Companies are investing in upskilling and remote work frameworks to counter labor shortages and geopolitical disruptions.

What Investors Should Avoid

1. Overexposure to Trade-Sensitive Sectors: Both metals and IT are highly susceptible to global trade policies and currency fluctuations. Diversification across sectors and geographies is critical.
2. Ignoring Commodity Price Cycles: Firms with weak hedging mechanisms face margin erosion during LME price corrections.
3. Neglecting ESG Factors: Environmental concerns, such as carbon emissions in metals, could trigger regulatory penalties and reputational risks.

Conclusion

The Indian equity market's 2025 performance highlights the interplay between global macroeconomic forces and sector-specific vulnerabilities. While the metal sector's resilience offers opportunities amid commodity rallies, its exposure to import competition and domestic demand weakness requires careful hedging. Similarly, the IT sector's underperformance underscores the need for strategic diversification and adaptability in a shifting trade landscape. Investors must prioritize risk mitigation through advanced hedging tools, ESG alignment, and a nuanced understanding of global trade dynamics to navigate these challenges effectively.