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Stocks of major steel companies are expected to move up in line with the market next week in the absence of independent factors governing the steel sector. Stock indices are likely to rise in the coming sessions over continued optimism of a rate cut from the Reserve Bank of India when it meets early next month given the recent surge in economic indicators. The recent decline in international commodity prices, particularly gold and crude oil, coupled with the easing inflation trend is likely to support market sentiment in coming sessions. The market also will draw support from yesterday's trade data that showed India's exports in March grew 7% on year to $30.85 bln and imports fell 2.9% to $41.16 bln.
The Jan-Mar current account deficit is likely to shrink to 4.0-4.5% of gross domestic product from 6.7% in Oct-Dec if yesterday's trade data is accounted for. The Supreme Court order to resume mining in Karnataka category B mines is not going to have any immediate positive impact on steel companies as the R-and-R (rehabilitation-reclamation-restoration) plan itself will take at least six months. Stocks of Kalyani Steels rose over 15% today, as the Supreme Court allowed 63 Category-B iron ore mines in Karnataka to resume mining subject to reclamation, rehabilitation, and compensation payments. The positive momentum in stocks of steel companies is not likely to continue, as the SC nod does not have any immediate benefit.
JSW Steel Ltd and Sesa Goa Ltd along with Kalyani Steel and some other companies will have easier access to iron ore after mining operations commence in full swing in Karnataka. In the week ended Thursday, stocks of most major steel companies have risen between 2.0-5.5%. Tata Steel Ltd gained the least among steel companies this week, as Moody's Investors Service assigned a Ba3 corporate family rating with a negative outlook on Wednesday. The rating agency particularly noted the weakness in Tata Steel's Indian operations due to slow domestic economic growth. The steel company's consolidated credit metrics are expected to remain weak in 2013-14 (Apr-Mar) because of sluggish demand and overcapacity in Europe. Moody's Investors Service also affirmed B3 corporate family rating to Tata Steel's wholly-owned subsidiary Tata Steel UK on Wednesday.
