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Stocks of major steel companies are seen down next week on continued weakness in fundamentals amid onset of monsoon. Fundamentals have already been dull in the domestic market due to slowing economic growth and with the onset of monsoon, industrial activity has also taken a hit. This is expected to continue in coming weeks as well. Domestic industrial activity usually takes a hit once monsoon arrives and this is usual annual phenomenon. The movement of the rupee against the dollar will also be eyed by the steel companies as nearly all rely on imports for coking coal to meet their requirements. Stocks of steel makers fell sharply in the week ended Friday on worries the companies' input costs may rise due to depreciation of the rupee against the dollar. A rise in input costs when demand is weak hurts steel companies' margins.
Stocks of Jindal Steel & Power are expected to consolidate at current levels after having declined nearly 13% week-on-week after the Central Bureau of Investigation registered a case against the Delhi-based company over coal block allocation. The probe agency is investigating alleged irregularities in the awarding of coal mining rights after the Comptroller and Auditor General of India report had pegged a notional loss of 1.86 trln rupees due to faulty allocation process. Stocks of Tata Steel Ltd are expected to move in a narrow range with a negative bias on reports that the company has announced capital expenditure of $2.5 bln-$2.7 bln for the current financial year amid challenging demand environment, both locally and globally, and a consolidated gross debt of $12 bln as on Mar 31.
