MUMBAI: Base metal futures on MCX rose by an average 3 per cent after the People's Bank of China lowered lending rate by 108 basis points to 5.58 per cent on Wednesday. Copper and zinc rallied the most rising by nearly 4 per cent, followed by a rise of 3 per cent in lead and nickel prices. The rate cut is seen as another effort by China, the biggest contributor to world growth, to reduce the effect of a global recession. In early November, the government announced a $586 billion package aimed to revive housing and infrastructure through 2010. “The announcement is definitely seen as a positive development for the base metals which managed to breach last fifteen day's range. If prices close with significant gains today, the rally could get extended by another 5 per cent in the coming week,” said Navneet Damani, research analyst at Anand Rathi Commodities. The Chinese central bank also cut deposit rate by similar percentage to 2.52 percent and said it was aimed “at ensuring sufficient liquidity in the banking system, and to promote steady loan growth so that monetary policy can play an active role in supporting economic growth.” The rally, however, will not change the bearish sentiment towards the base metals as most of the developed world economies face a recession. According to Praveen Singh, research analyst at Sharekhan Commodities, the rebound could be on the back of considerable short covering but the bearish scenario for most metals remains intact. “There is still a 10-15 per cent decline possible for most of these metals before the market sees a bottom,” he said.

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