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Most steel stocks are seen rangebound next week with largely bullish on Tata Steel once again. Investors will be eyeing companies' production data for August in the coming days. Nifty ended flat from last week at 5471.70 while the BSE Sensex ended up 0.5% week on week at 18619.72. The CNX Metal Index ended down 0.61% from last week at 1944.60. Tata Steel may benefit on an operational level due to the heavy depreciation of the rupee. However, weakness in the domestic market coupled with a very high foreign currency debt of $8 bln, which is 70% of the company's total debt, will give it "limited headroom to cope" with foreign exchange-induced higher debt levels. Since May 22, the rupee hasdepreciated 25% against the dollar. Maintain a neutral view on Steel Authority of India. We expected that although the company imports 80% of its coking coal, its product prices are import parity-indexed and hence are appropriately hedged, albeit with a lead-time of one quarter.
Most steel stocks are seen rangebound next week with largely bullish on Tata Steel once again. Investors will be eyeing companies' production data for August in the coming days. Nifty ended flat from last week at 5471.70 while the BSE Sensex ended up 0.5% week on week at 18619.72. The CNX Metal Index ended down 0.61% from last week at 1944.60. Tata Steel may benefit on an operational level due to the heavy depreciation of the rupee. However, weakness in the domestic market coupled with a very high foreign currency debt of $8 bln, which is 70% of the company's total debt, will give it "limited headroom to cope" with foreign exchange-induced higher debt levels. Since May 22, the rupee hasdepreciated 25% against the dollar. Maintain a neutral view on Steel Authority of India. We expected that although the company imports 80% of its coking coal, its product prices are import parity-indexed and hence are appropriately hedged, albeit with a lead-time of one quarter.
