D-Street Buzz: Metal stocks under pressure, JSPL, JSW Steel, Tata Steel slip 2-3%


The Indian stock market was trading in the green on May 26 but on the cautious side following positive Asian markets. The Sensex was up 37.95 points or 0.07 percent at 50,675.48 in the morning trade and the Nifty added 6.8 points, or 0.04 percent, at 15,215.30.

The metal index was down over a percent,t dragged by Jindal Steel & Power, JSW Steel, SAIL and Tata Steel.

In its report on the steel sector, global research firm Credit Suisse downgraded Tata Steel to neutral from outperform with the target at Rs 1,250 per share.

It has also downgraded JSPL to neutral from outperform with the target at Rs 450 a share and JSW Steel to underperform from neutral with target at Rs 550 per share.

Jindal Steel and Power reported manifold jump in its consolidated profit after tax (PAT) to Rs 1,900.51 crore during the fourth quarter ended March 2021, mainly on account of higher income. Its “net profit after tax from continuing operation” in the year-ago quarter was at Rs 82.13 crore, JSPL said in a BSE filing.

Also, JSW Steel posted manifold jump in its consolidated net profit at Rs 4,191 crore for the quarter ended March 31, 2021 and said it will spend over Rs 25,000 crore on projects in Odisha, Karnataka and Jammu & Kashmir.

Domestic brokerage firm Kotak Institutional Equities has downgraded the stock to reduce from buy as valuations are rich. It has a target of Rs 640 a share. The brokerage firm believes that steel margin increased to record high levels. It feels that steel price hikes, despite cost inflation, should further expand margin.

Credit Suisse is of the view that of the four steel names, JSW is trading at most expensive valuations, adding that the expectation of elevated domestic iron ore prices would also hurt spreads.

The global research firm has maintained a neutral call on SAIL with target at Rs 140 per share.

According to a report by Financial Times, China’s National Development and Reform Commission would crack down on monopolies in commodity markets to curb the “spread of false information and hoarding”. The immediate effect was on Dalian iron ore futures that fell by 7 percent to $ 163 a tonne. Prices are now down by a fourth from a record high earlier this month.

Iron ore prices have soared in recent months, carrying forward the rally seen in 2020, with prices now over twice of that a year ago. China’s ability to crack down on the iron ore market could go beyond warnings, with measures such as discouraging financial investors and storage of the metal by traders. If metals are seen as a riskier bet then investors could unwind positions sending prices lower, FT said.

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