Since the beginning of February, the Nifty metal index has gone on an incredible streak, up 62 percent. Even the second wave of the coronavirus pandemic has been unable to halt the metal index's rise. An improving commodity cycle, booming steel prices, and strong demand have all supported the upward trend. Domestic and international brokerages, as well as the Big Bull Rakesh Jhunjhunwala, have all expressed bullish views on metal stocks. Furthermore, China's recent tax reform is expected to sustain the upward trend.
While domestic steel prices have recently risen, they continue to be cheaper than imports. In May, domestic steel mills raised HRC/CRC prices by Rs 4,000/4,500 per tonne to Rs 67,000/80,000 per tonne, according to Motilal Oswal. They added that domestic steel prices are selling at a Rs 8,000/t discount to the landed cost of imports, suggesting room for further increases. CLSA predicts that Indian steel mills will raise prices by Rs2,000-4,000 per tonne in the near future, with another hike in mid-May or early June.
TATA Steel remains CLSA's top pick in the market, according to the firm. Tata Steel's stock has risen 79 percent since the Union Budget, and now trades at Rs 1,075 per share. ”We see considerable upside potential for steel stocks in our and consensus forecasts as the latest estimate of a sharp reduction in steel prices is unlikely to play out in the near term,” they added.
Meanwhile, Motilal Oswal is keeping an eye on SAIL. After the Union Budget, the stock price of SAIL has risen by 132 percent. In a recent paper, Motilal Oswal said, "SAIL is our preferred play given its higher sensitivity to costs, on account of greater operational and financial leverage, as well as attractive valuations."