metal stock bleed: A sharp fall in iron ore and steel prices on fears of a fall in commodity demand, led to the fall in Indian metal stocks. The BSE Metal index ended at 15,071, down over 3 per cent. It had closed at 15,612.50 in the previous session. In June, the index fell as much as 13 per cent, while it is down 37 per cent from its 52-week high. Metal stocks fell up to 4 per cent in Monday’s trade, making the sector the biggest pressure on the benchmark index.
Components of the S&P BSE Metal Index included JSW Steel Ltd (down 4.95 per cent), Tata Steel Ltd (down 3.01 per cent), Steel Authority of India Ltd. India Ltd (down 2.72 per cent), NMDC Ltd (down 1.91 per cent), Jindal Steel & Power Ltd (down 1.64 per cent), were the top losers. Other losers included Hindalco Industries Ltd (down 1.41 per cent), APL Apollo Tubes Ltd (down 0.76 per cent), Coal India Ltd (down 0.71 per cent), Vedanta Ltd (down 0.21 per cent), and National Aluminum Company Ltd. (down 0.07 percent).
Additionally, a disappointing remark from Jefferies ruined investors’ risk appetite. It also revised its second-half forecast for iron ore from $115 a tonne to $110 a tonne, pointing to market surpluses, steel production headwinds and slowing Chinese demand, with a view to feeding the economy sluggishly. The policy is relaxed for
However, Jefferies said it’s still too early to take a constructive turn because price-to-book valuations remain above historical troughs, earnings visibility is poor, and consensus will continue to decline. The price-to-book ratio compares a company’s market value to its book value.
Metal stocks also saw a sell-off on demand concerns in top consumer China. China is also a top producer of metals. Mills in China have disabled dozens of blast furnaces after domestic demand weakened due to the COVID-19 lockdown and inclement weather.
It has cut estimates on the metal pack, mainly Hindalco, JSW Steel, Tata Steel by 2-34 per cent and believes it is too early to take a constructive turn, as PB valuations remain above historical troughs, poor earnings visibility and the consensus will decline. ,
Nifty Metal recorded the biggest fall in comparison to all other sectoral indices on Monday nifty Tata Steel, JSW Steel and SAIL were the biggest pullers of the index.
Mohit Nigam of Hem Securities said the recent interest rate hike cycle and fall in metal prices have dampened the bullish sentiment on steel stocks and could lead to short-term stock price volatility.
According to Jefferies, a sharp correction in metal prices is likely to lead to major margin reduction for Indian metal companies during FY22-24.
It has maintained a hold rating on domestic stocks Hindalco and Tata Steel with lower target prices of Rs 310 and Rs 830/share respectively, while ‘underperform’ target on JSW Steel at Rs 405, a fall of 26.6 per cent at its close on Monday. Percentage compared to price.
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