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Stocks of major steel companies are seen slightly down next week due to weak fundamentals in the domestic market. Bearish demand for the commodity from the auto sector, and not-so-strong demand from the construction and infrastructure segment, is expected to keep sentiment muted in coming sessions.
Better-than-expected performance by steel giants such as Tata Steel in the quarter ended March is, however, expected to lend some support to market sentiment, analysts said. Tata Steel reported a lower-than-expected consolidated net loss of 65.28 bln rupees for Jan-Mar, and a sharp improvement in operating performance, with consolidated margins expanding almost 250 basis points.
The company's consolidated earnings before interest, taxes, depreciation and amortisation margin in Jan-Mar was 12.6% as against 10.1% a year ago. The net loss was mainly due to an impairment charge of 83.55 bln rupees due to write-down of assets and goodwill for the financial year ended March.
Strong operating performance amid challenging macro economic scenario was the main reason that pushed up Tata Steel's stock over 5% in early trade. Tata Steel's earnings were encouraging, and hinted that efficient management can lead to good returns even in challenging environment. In case of JSW Steel, which posted a consolidated net profit of 2.96 bln rupees in Jan-Mar as against a net loss of 737 mln rupees in Oct-Dec, the company's crude steel output growth guidance at 9-10% for the current financial year is likely to keep its share price up early next week.
