www.rupeedesk.in
Stocks of major steel companies are seen range-bound next week with a negative bias as
weak domestic demand has been weighing on the sector for some time. Stock markets
will have a truncated week on account of two government holidays. The stock market
will remain closed on Wednesday for the Indian festival of Holi and on Mar 29 for Good
Friday.
Macro data puts forward the slow demand growth in developed countries and new
property curbs are being raised in China. With tepid steel production growth ensuing in
2HCY13e (second half of this calendar year) and rising global iron ore supply, prices will
be capped. The next few quarters don't seen to be good for steel stocks as weakness in
prices and inventory pile-up are seen weighing on the earnings.
Fine prices are already trading at discount to imported, given subdued steel demand, but
lumps and pellets will undergo correction, in line with global prices. In case of sharp fall
in iron ore prices, Steel Authority of India and Jindal Steel and Power will be the most hit
as they are 100% integrated, followed by Tata Steel (40%) while JSW Steel will benefit
from non-integration.
