Market Reacts Sharply as Silver Prices Witness Sudden and Steep Correction
Indian equity and commodity markets saw heightened volatility after silver prices witnessed a sharp intraday fall, dragging silver-linked stocks and exchange-traded funds lower. Shares of Hindustan Zinc slipped nearly 5 percent on January 7 as silver futures dropped sharply on profit booking and a stronger US dollar, unsettling investor sentiment.
Silver prices declined by as much as ₹4,000 per kilogram within an hour, taking the precious and industrial metal below the psychologically important ₹2.5 lakh per kg mark. The sudden correction came after silver had touched record lifetime highs earlier, triggering concerns over short-term overheating.
Hindustan Zinc Shares Slide to Three-Week Low Amid Metal Weakness
Hindustan Zinc shares fell to around ₹599.25 apiece, marking a near three-week low and extending losses for the second consecutive session. The stock has been highly sensitive to silver price movements, given that the company is India’s largest producer of refined silver with a minimum purity of 99.9 percent.
While the stock is still up sharply over the medium term, the sudden drop highlighted how quickly sentiment can turn when commodity prices reverse. In the past five trading sessions, the stock has declined over 3 percent, though it remains up nearly 22 percent over the past month and 37 percent over the last six months.
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Silver Futures Correct Sharply After Hitting Record Highs
Silver futures on the Multi Commodity Exchange of India witnessed heavy selling pressure across contracts. March expiry silver futures fell more than ₹3,000 to ₹2,47,529 per kilogram after touching a lifetime high of ₹2,59,692 per kg in the previous session.
Other contracts also saw sharp declines:
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May expiry futures dropped over ₹3,300 to ₹2,54,876 per kg
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July expiry futures slipped more than ₹4,000 to ₹2,62,399 per kg
Market participants attributed the sharp fall to aggressive profit booking following the recent rally, coupled with pressure from a firmer US dollar ahead of key US jobs data. Rising real yields tend to weigh on non-yielding assets such as precious metals, amplifying downside moves.
Silver ETFs Mirror the Fall as Investor Sentiment Turns Cautious
The sharp correction in spot and futures prices spilled over into silver exchange-traded funds, which fell broadly by around 3 percent or more. Silver ETFs across fund houses such as Edelweiss, HDFC, UTI, Axis, Zerodha, Groww, Tata, SBI, DSP, Aditya Birla, Mirae Asset, Nippon and ICICI Prudential saw synchronized declines, reflecting the broader weakness in the metal.
Kotak Silver ETD, Motilal Oswal Silver ETF and 360 ONE Silver ETF also extended losses for the second consecutive session. The move underscored the inherent volatility in silver as an asset class, particularly after a sharp momentum-driven rally.
What Drove the Sudden Sell-Off in Silver Prices
Market experts believe multiple factors contributed to the sharp decline:
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Profit booking after silver’s strong rally in recent months
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Strengthening of the US dollar weighing on precious metals
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Position unwinding ahead of key macroeconomic data from the US
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Elevated speculative positioning in silver futures
“Silver shows higher volatility than gold and has exhibited bubble-like behaviour in the recent rally,” said Aggarwal from VSRK Capital. “Strategy entry can be planned when prices stabilise near support zones with market sentiment improving, but metals often remain choppy for years after a strong rally,” he added.
What This Means for the Market in the Near Term
From a broader market perspective, the decline in silver has added a layer of caution to metal stocks and commodity-linked instruments. Traders are likely to remain watchful in the coming sessions, as further volatility cannot be ruled out if global cues remain unfavourable.
In the near term:
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Silver-linked stocks may remain under pressure
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ETFs could see further volatility tracking global prices
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Commodity traders may reduce leverage and position sizes
However, analysts caution against extrapolating short-term price moves into long-term trends.
Long-Term Outlook for Silver and Hindustan Zinc Remains Constructive
Despite the sharp correction, the medium-term outlook for silver remains positive, according to several market experts. Harshal Dasani, Business Head at INVasset PMS, believes structural demand continues to support the metal.
“Silver had become a momentum trade in 2025, rising sharply and making it vulnerable to profit booking once sentiment turned,” Dasani said. “Looking ahead to 2026, the outlook remains constructive due to strong industrial demand from electronics, solar energy, and electrification, along with persistent supply constraints.”
He added that near-term price direction will continue to be influenced by the US dollar and real interest rates. “Any move toward higher yields pressures silver, while softer yields and risk aversion restore its appeal,” he noted.
Impact on Traders and Investor Portfolios
For short-term traders, the sudden drop highlights the importance of risk management when trading volatile commodities like silver. Sharp intraday moves can quickly erode leveraged positions.
For long-term investors:
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Exposure to silver and silver ETFs may see temporary drawdowns
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Hindustan Zinc investors should track silver prices alongside operational performance
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Portfolio diversification remains critical to manage commodity-linked volatility
As markets digest the recent correction, investors are advised to focus on fundamentals rather than short-term price swings.
Cautious Optimism as Markets Await Stability in Silver Prices
While the sharp fall in silver prices has rattled markets, analysts believe such corrections are healthy after a strong rally. For Hindustan Zinc, long-term prospects remain tied to sustained demand for silver and base metals, even as near-term volatility persists.
In the coming days, global macro cues, currency movements and investor positioning will play a key role in determining whether silver stabilises or sees further downside.
