Nifty Metal index hits 52-week high; Jindal Steel, APL Apollo up over 5%

January 03
14:16 2018
Stocksof metal companies were in focus with Nifty Metal index hitting 52-week high of 4,015.45 on the National Stock Exchange (NSE), on expectations of strong earnings improvement over the next two to three quarters for steel companies. The metal index surpassed its previous high of 3,985.50 touched on December 29, 2017 in intra-day deal.

JSPL and APL Apollo Tubes from the Nifty Metal index have rallied 6% each, while Steel Authority of India (SAIL) up 3% hitting their respective 52-week highs on the NSE. Hindalco Industries and NMDC too hit 52-week highs today.

At 01:32 PM; Nifty Metal index, the largest gainer among sectoral indices, was up 1.4% at 3,998 points, against 0.28% rise in the Nifty 50 index at 10,471 points. From its recent low of 3,531 on December 6, 2017, the metal index surged 13% as compared to 4% rise in the benchmark index.

LMEX, a gauge of six metals traded on the London Metal Exchange (LME) was up 10% during the same period. LMEX closed at an over one-year high of 3,429 on December 28, 2017.

According to analysts at Kotak Institutional Equities, the winter curtailments in China’s main steel producing regions will tighten supply—industry utilization is already greater than 80% post supply-side reforms. The capacity utilization for unaffected capacities can increase to 95% due to supply tightness.

As a consequence, China’s steel prices will rise and margins improve, and steel exports will fall aiding global steel prices. We expect domestic steel prices to increase and buoy earnings of Indian steel companies over the next two to three quarters for names like Tata Steel, Jindal Steel & Power (JSPL) and JSW Steel, the brokerage firm said in recent report.

Analysts maintain ADD rating on Tata Steel (TP: Rs 780), JSW Steel (TP: Rs 270) and BUY rating on JSPL (TP: Rs 185). The brokerage firm expects strong earnings improvement (led by margin expansion) over the next two to three quarters for Indian steel names—possibly exceeding its full year estimates on operating margin front.

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