Indian equity benchmarks opened on a positive note and the Nifty reclaimed 15300 points on Monday’s early trades. However, losses in the metal and oil & gas sectors offset gains. 

The tide has turned for metal stocks. Metal stocks in general are melting sharply after a massive outperformance last year. Nifty Metal plunged 4.53% on Monday’s intraday trades. The government waived customs duty on the import of some raw materials used by the steel industry. However, the index has been on a downturn since the government increased export duty from nil to 15% in May, this year. 

“We see this as an extremely negative development for the steel sector and expect broad-based multiple de-rating. We downgrade steel/stainless equities under our coverage to either hold/reduce/sell, ” ICICI Securities said. Accordingly, it has reduced the ratings of metal stocks.

Metal stocks like JSW Steel, Tata Steel, Steel Authority of India Limited and Vedanta Limited continue to reel under pressure as global growth is projected to slow down from an estimated 6.1% in 2021 to 3.6% in 2022. Analysts say that increased risks of a global slowdown, persistently higher inflation and the aggressive stance of the US Fed have triggered the fear of recession. These factors are weighing down the markets including commodities across the globe.

Further, they believe that the reimposition of a lockdown in China could be a reason why metal stocks are suffering since China contributes to a major chunk of demand in the sector. The lockdown might cause a delay in boosting global commodity prices.

Vedanta Limited was one of the top losers and its shares nose-dived 12.67% on Monday’s intraday trades after it put its Tuticorin copper plant in Tamil Nadu for sale. This plant accounts for 40% of India’s copper output and employs about 30,000 people directly or indirectly.

Steel Authority of India Limited tumbled 6.14% on Monday. It is currently trading at ₹64.10 apiece. On June 17, 2022, ICICI Securities gave a ‘reduce’ call on the shares with a target price of ₹ 61.

JSW Steel’s shares slipped 2.05% to ₹543.25 apiece. On June 17, 2022, ICICI Securities gave a ‘reduce’ call on the shares with a target price of ₹ 448. The time period given by the analyst was one year.

Tata Steel’s shares plunged 5.71% to ₹ 854.90 apiece on Monday. ICICI Securities gave a ‘reduce’ call on the shares with a target price of ₹ 827. The time period given by the analyst is one year when its share price can reach the defined target.

Written By – Simran Bafna


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