Metal stocks saw healthy buying activity on Wednesday, after the high import duty levied by the Indian government on gold, silver and other precious metals. This led to an increase in positive sentiment for mining and metal stocks.
Effective May 13, 2026, the effective import duty on gold and silver was changed to 15% from the previous 6%. The overhauled structure consists of a 10% basic customs duty and 5% Agriculture Infrastructure and Development Cess (AIDC).
The move was made to ease pressure on India's foreign exchange reserves and to stop excessive imports of bullion amidst high geopolitical tensions and commodity prices.
The Nifty Metal index rose by around 1.3% after the announcement, as all the major constituents were trading in positive territory. Shares of Hindustan Zinc Ltd rallied as much as 5.43% to Rs. 676.80 apiece on the NSE, while Vedanta shares gained nearly 3% to Rs. 313.95.
The National Aluminium Company (NALCO) also rallied by over 1.5%, with investors looking for better returns from higher domestic metal prices.
Buying in bullion surged as both gold and silver hit the upper circuit. Gold’s June futures surged 6.19% to Rs. 1,62,933 per 10 grams. Silver's July futures jumped 6.61% to Rs. 2,97,499 per kg.
Analysts believe the higher duties will significantly drive up the landed cost of imported bullion, thereby supporting local producers and encouraging the recycling of old jewellery.
In FY2025-26, India's gold imports stood at $71.98 billion, marking the highest level in history, up from $58 billion in the previous year. The gold imports contributed over 9% to the total imports of the country, resulting in increased pressure on the trade deficit and foreign exchange reserves.
According to analysts, a rise in silver prices could have a direct impact on the profitability of one of India's biggest producers of silver, Hindustan Zinc. The company is a zinc and lead mining firm, which is a by-product of silver.
With a higher domestic value of silver, producers such as Hindustan Zinc can sell production at a better realization rate without a notable increase in production cost, which can help to improve the margin and overall earnings.
This could also benefit Vedanta indirectly since it is a majority stakeholder in Hindustan Zinc. Hindustan Zinc's consolidated financial position could benefit from its earnings and dividend payments as the parent company continues to maintain relatively high debt.
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The government’s move comes amid continued geopolitical tensions in West Asia and rising concerns around global commodity inflation. Prime Minister Narendra Modi has recently urged citizens to cut down on gold imports and unnecessary foreign trips as part of a broader restraint aimed at protecting the country’s foreign exchange reserves.
Demand for gold in India continues to be high, especially in jewellery segments and home investments, and the country is the second largest consumer after China. The recent renewed rally tied to precious metals and metal producers has been further fueled by growing uncertainty, which continues to drive demand for precious metals.