On a Year to Date basis, the Nifty Metal Index has outperformed the Nifty 50 index, the Nifty Metal has given a return of 2.20 percent and the Nifty 50 has given a negative return of 5 percent.
Top 3 Constituents of Nifty Metal have also given outperforming returns on a Year-to-date basis, Tata Steel gave a return of 12 percent, Hindalco Industries with 18 percent, and JSW Steel with 13 percent.
Why Metal Stocks are Outperforming?
China, being the leading exporter and consumer of Steel in the world, has decided on an Output Cut that is estimated to be around 50 million tons. The output cut is being done by China to meet their emission targets set by them, sluggish demand for steel in their country, over capacity, and because of the ongoing decline in property prices.
ICICI Securities states that, because of China’s property crisis, the demand for steel was low there, so their exports have reached an 8-year high with 110 million tonnes of steel exports in 2024. Additionally, the steel imports from countries that have Free Trade Agreements (FTA) with India, such as South Korea and Japan, have driven the steel imports in India to an 8-year high.
Because of all the Imports, the domestic steel prices have declined to a 4-year low of Rs 48,000 / tonne. Directly impacting the Profits and Margins of steel companies. But the latest production cut news from China is being taken as a very positive indication for steel companies, as more exports by them will significantly increase their Revenue and Profits.
Stock to Focus on
Jefferies has given a Buy rating for Tata Steel from an earlier target of Rs. 165 to Rs. 180 and an Upside of 18.42 percent from the current levels, they has also increased the target price for JSW Steel from an earlier target of Rs. 850 to Rs. 920, but have given a hold rating, stock is currently trading at Rs. 1,020. On Hindalco, Jefferies gave a target of Rs. Rs.800 with an Upside of 15 percent from current levels.
Written By Abhishek Das
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