Telecom Stocks Outlook for the week - 02.09.2013 - 06.09.2013

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Telecom stocks are expected to ride out the volatility in the broad market and trade with a positive bias next week, with the sector likely to get reprieve from high spectrum charges. In the open house discussion held by the Telecom Regulatory Authority of India held on Aug 26, the regulator has indicated that it is in favour of setting a lower base price for the upcoming spectrum auction. The regulator's recommendations on this are expected in the next few weeks. Despite minor opposition from some quarters (primarily CDMA operators and consumer groups), we believe TRAI is inclined towards a significant reduction in reserve price. A reasonable spectrum reserve price as demanded by the industry is expected to lower the strain on the already highly leveraged balance sheet of the companies. Among individual stocks, Idea Cellular and Reliance Communications are expected to gain, while Bharti Airtel may see some selling pressure. Bharti Airtel next week is expected to underperform but the counter is not expected to see sustained heavy selling.

Steel Stocks Outlook for the week - 02.9.2013 - 06.09.2013

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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.

Steel Stocks Outlook for the week - 12.08.2013 - 16.08.2013

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Stocks of most of the steel companies are seen down in the next week owing to an apprehension that Apr-Jun earning of companies such as Hindalco Industries, Steel Authority of India, and Tata Steel are likely to be disappointing. Overall, the liquidity in the broad market will face repression next week, as the Reserve Bank of India announced yesterday that it will start auctioning 220 bln rupees of cash management bills every Monday in order to check liquidity and contain foreign exchange volatility. The action of the RBI will lead to a rise in short-term interest rates. The steel sector will not see a revival until companies completely recover from the impact of iron ore-mining ban, which was implemented two years ago. It will take around six months for these mines to resume operations. Unless there is revival in the real estate or infrastructure sector, steel will continue its slump downwards. 

Tata Steel's consolidated net profit is seen falling 63% on year to 2.2 bln rupees in Apr-Jun and net sales are seen down 4% on year to 321.68 bln rupees. We expect net revenue to increase 4% YoY (down 14% QoQ) to 93 bln due to higher sales volume. Steel volumes are expected to increase 21% YoY (down 16% QoQ) to 1.9 mln tn. Realization is expected to decline 14% YoY (flat QoQ). We expect EBITDA (earnings before interest, tax, depreciation and amortisation) to decrease 9% QoQ to 27 bln rupees and EBITDA/ton to fall 10% QoQ to USD236/ton. 

Tata Steel will report its Apr-Jun earnings on Tuesday. The Apr-Jun results of Steel Authority of India are due on August 14. 

Steel Stocks Outlook for the week - 05.08.2013 - 09.08.2013

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Stocks of frontline steel companies are unlikely to gather momentum in the coming week due to subdued demand in the automobile and infrastructure sectors, which are the key consumers of the alloy. Stocks of steel companies might not pick up in the short run. The falling trend can continue in the absence of any growth triggers. Market players are not also expecting good prices and do not see demand picking up because of slow economic growth. There is no near-term rebound seen in the stocks of steel making companies. If stocks trade below their near-term support, they may slide further. Stocks of Tata steel may gain if market picks up and if Tata Steel Europe's results come out and show good margins.

The Apr-Jun results of SAIL are due on August 14. We expect weak results. We have estimated a 50% decline in net profit. The result of the company for Apr-Jun showed 28% increase that can be mainly attributed to its subsidiary Jindal Power Limited while the foreign and other subsidiary companies have disappointed. The company revised its capital expenditure guidance by 40% two days ago to 120 bln rupees.

Steel Stocks Outlook for the week - 29.07.2013 - 02.08.2013

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Sluggish domestic demand and weak prices globally are seen weighing on the stocks of frontline steel companies next week. The market will also keep tracking the Reserve Bank of India's review of the monetary policy, due on Tuesday, and Apr-Jun earnings. However, the negative momentum for the metal is quite strong. The coming week is likely to follow the falling trend as there is no positive signal for the sector adding that a major reversal is unlikely. All these stocks are breaking their major support level, especially Tata Steel Ltd and JSW Steel Ltd. They have fallen more than 50% since January. 

The slow economic growth has hit the automobile and infrastructure sectors, which are major consumers of the alloy, leading to sluggish demand. The Society of Indian Automobile Manufacturers had at the beginning of the current financial year projected a 6-8% sales growth for the sector. However, total sales during Apr-Jun were 2.1% lower on year. The second quarter value growth for the auto sector is to remain subdued. Global factors have also played a significant role in underperformance of stocks because of weakness in prices internationally. The outlook remains negative. Sales in the steel sector have been very poor because of abundant supply and lesser demand worldwide, especially from the emerging economies that are facing slower growth. 

Steel Stocks Outlook for the week - 03.06.2013 to 07.06.2013

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Stocks of major steel companies are expected to continue their downward movement next week on weak fundamentals. There is over-supply in the domestic market and uncertainty over when demand for steel will pick up. The uncertainty on demand is the main factor that is expected to keep performance of domestic steel giants muted in the coming sessions. In the week ended Friday, stocks of steel companies declined 3-7%. There is no trigger for it to move up. In the global market, iron ore prices tumbled to a seven-month low as negativity about the outlook for demand and concerns regarding overcapacity in the Chinese industry spread through. Iron ore is the key raw material used in the making of steel. The China Iron and Steel Association in its report said that mainland's steel industry made $24.72 mln profits in April, recording the fourth monthly decline. This indicates slowing demand in the world's largest consumer of steel. It portends a gloomy global steel demand, which will impact sentiment in the domestic steel industry.

Steel Stocks Outlook for the week ( 27.05 (.2013 - 31.05.2013 )

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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.

Steel Stocks Outlook for the week - 20.05.2013 to 24.05.2013

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Stocks of major steel companies are seen bearish next week on continued weak fundamentals. Weak domestic steel demand amid high supply may continue to weigh on local steel prices. Demand for steel is also dampened by slowing economic growth. However, the downside in stocks of steel companies is expected to be limited on expectations of not-so-poor Jan-Mar earnings of Tata Steel Ltd, especially after the company announced $1.6 bln consolidated goodwill impairment charge for 2012-13 (Apr-Mar).

Tata Steel is the country's leading primary steel producer and is also the sixth largest producer of the alloy in the world. Worsening macroeconomic environment in Europe and shrinking demand in the continent forced Tata Steel Ltd to take the goodwill impairment hit. Jsw Steel and Tata Steel is scheduled to announce its Jan-Mar earnings on May 23.

Steel Stocks Outlook for the week - 13.05.2013 to 17.05.2013

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Stocks of major steel companies are seen slightly down this week, as the sector's fundamentals continue to remain weak. Most companies also have refrained from raising steel product prices for May due to the slowdown in demand. Stocks of metal companies had risen early last week but gave up all gains eventually on profit booking. In the coming week, there is no positive trigger that can really lift prices of major steel stocks. The government imposed basic customs duty of 2.5% on iron, and aluminium, steel and stainless steel scrap on May 8 to safeguard interests of domestic metal producers. However, industry officials fear that such a move could raise prices of finished goods in turn hurting the already beleaguered sector.

Scrap is a key input in any metal manufacturing, which is not available in large quantities locally, thus imports are imperative. An increase in import duty would result in eventual increase in finished goods price, thus increasing inflation and this would dampen the spirit of the (metal) sector that is already quite low. Among ferrous metals, Ushdev International actively trades in steel and iron ore, and in non-ferrous metals segment, it trades in copper and zinc, among others.

Steel Stocks Outlook for the week - 06.05.2013 to 10.05.2013

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Stocks of major steel companies are seen extending gains next week on expectations that the 25-basis-points repo rate cut by the Reserve Bank of India today will spur investments. In the week ended Friday, stocks of steel companies rose 1-2% on hopes of steel demand picking up in the domestic market. We see an upside of about 2-3% in steel stocks in the next few sessions.
   
The repo rate cut is likely to encourage investment in capital intensive sectors like infrastructure, where demand for steel products is strong. There are no major earnings of steel companies next week and so there may not be much of stock-specific movement. The upside in stocks of steel companies will be broad.
   
Domestic steel companies are also likely to hike product prices for the month of May on expectations of a rise in demand for the alloy. This may push up stock prices of major steel companies in coming sessions. In the domestic market, steel long products find wide applications in the infrastructure sector, while flat products are used in the auto sector. Though the demand outlook is positive for steel from the infrastructure sector, muted demand for the alloy from automobile companies is expected to limit the upside in share prices of steel companies.

Steel Stocks Outlook for the week : 29.04.2013 to 03.05.2013

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Stocks of major steel companies are seen slightly down next week due to weak steel prices and expectations of not-so-bullish Jan-Mar earnings. Domestic steel prices have weakened because of sluggish demand following a slowdown in the economy, they said. India's economy grew at its slowest pace in a decade in 2012-13. Issues in availability of iron ore and project delays also remain major negative factors for the sector.

The Supreme Court's decision to reject petitions of JSW Steel Ltd and Kalyani Steels Ltd, seeking review of the apex court's September 2010 verdict that quashed mining leases granted to the companies, is expected to weigh on the share price of the two steel makers. Shares of Jindal Steel & Power are expected to fall in the coming sessions as the Delhi-based company reported a nearly 35% on-year decline in its Jan-Mar consolidated net profit even as its topline was flat. Falling steel prices dented the company's earnings.

The company's bottomline at 7.60 bln rupees, was below Street expectation, while a 2.2% rise in topline to 55.83 bln rupees was above estimates. We expect that the company's net profit was seen at 9.61 bln rupees, while its revenues were expected at 52.21 bln rupees in Jan-Mar. However, the downside in shares of Jindal Steel & Power is seen limited because of company's outlook.

The Delhi-based company is planning to double its steel production capacity to 7.0 mln tn in the current financial year. Of this, about 1.5 mln tn will be in Angul and 2 mln tn will be in the company's Oman plant. We continue to like Tata Steel for its ongoing sustainable transformation, and we upgrade Steel Authority of India to equal-weight on valuations. Earnings of major steel companies will be eyed by the market for further direction.

Steel Stocks Outlook for the week:22- 26.04.2013

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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.

Steel Stocks Outlook for the week: 15.04.2013 - 18.04.2013

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Stocks of major steel companies are seen down in the next 4-5 sessions on expectations that poor domestic demand in Jan-Mar despite it being the peak season may have affected earnings. Domestic steel demand is at its peak during Oct-May on full-fledged industrial activity. A meaningful recovery in demand appears unlikely near-term as lead indicators are stagnant, recovery in investment cycle is likely to be delayed and de-stocking across end user segments should continue. Apart from the weak demand scenario in the domestic market, cheap steel imports from China may hit steel companies' product price hike prospects going ahead.

Steel Stocks Outlook for the week: (08 - 12.04.2013)

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Stocks of major steel companies are seen rising next week because of a technical bounce back, and on expectation of bullish earnings for Jan-Mar quarter. The way steel stocks have been declining in the last few sessions, a technical bounce is imminent. Stocks of steel companies declined in the range of 1-3% in the week ended Friday tracking the broad market. On the earnings front, since prices of coking coal have declined 50% on year in the quarter ended March, steel companies are likely to benefit despite the not-sostrong steel prices. Coking coal and iron ore are key raw materials used to make steel. Though iron ore availability continues to remain an issue in the domestic market, it is JSW Steel which will be the most affected. Steel Authority of India and Tata Steel have captive iron ore mines, and hence supply of iron ore is not an issue at all. Steel companies hiked product prices for April. Given the fall in iron ore and coal prices, steel companies should be able to improve margins on the back of these price hikes. Essar Steel raised steel prices by 3-4% early this month, and so have SAIL and Jindal Steel & Power

Steel Stocks Outlook for the week 01.04.2013 to 05.04.2013

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Stocks of major steel companies are seen down next week due to weak fundamentals and expectations of bearish Jan-Mar earnings. Domestic steel prices have fallen below international prices due to sluggish demand for the alloy. Moreover, rise in cheaper imports from Japan and Korea are restricting local steel players from hiking their product prices.

These factors, along with weak auto sales and sluggish construction demand, are contributing to the weak fundamentals of the sector. According to the Society of Indian Automobile Manufacturers, India's automobile sales growth in this financial year is seen at 3.6%, lower than the previous year. Likewise, steel demand from construction companies has been dwindling over the past couple of years because major infrastructure projects have been stuck for various reasons.

Earnings of most steel companies are expected to be disappointing and this will also keep the tone bearish in major steel stocks next week. Shares of JSW Steel have risen nearly 9% so far in the week. The steel maker produced 675,000 tn of crude steel in February, up 11% from the corresponding month last year. Production of flat-rolled steel products by the company, which find wide application in the automobile industry, rose 14% on year to 514,000 tn in February. However, production of long-rolled products, which find use in the construction sector, fell 14% on year to 132,000 tn.

Steel Stocks Outlook for the week (25.03.2013 to 28.03.2013)

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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.

Steel Stocks Outlook for the week (18-22.03.2013)

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Stocks of major steel companies are seen up next week taking cues from the market, where key share indices are likely to move up after having corrected in the last few sessions. Reserve Bank of India's mid-quarter policy review on Tuesday will also be eyed by the market next week. The central bank is widely expected to lower its benchmark rate by 25 basis points. Performance of Steel Authority of India Ltd would largely depend on the response the company gets to its offer for sale on Mar 20. The government is likely to sell 10.82% stake in SAIL. It currently holds 85.82% stake and after divestment, the shareholding would come down to 75%. Jindal Steel & Power Ltd will be spending 170 bln rupees for capacity expansion in 2013-14 (Apr-Mar), Ravi Uppal, chief executive officer and managing director said yesterday. This is likely to push up share prices of the steel company in the coming sessions.

Steel Stocks Outlook for the week: 11 - 15.03.2013

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Stocks of major steel companies are seen up next week taking cues from the market, where key share indices look positive with National Stock Exchange's 50-share Nifty expected to scaling 6000-6050. Rally in stocks of banks and oil and gas companies amid positive global sentiment lifted benchmark indices for the fourth session, pushing Nifty to a near one-month high intraday yesterday. Next week, investor focus will be on India's industrial production data for January, due Tuesday, and Wholesale Price Index-based inflation rate for February, due Thursday. There are no sector-specific triggers for steel companies but overall sentiment will remain positive in the coming sessions. If government continues to bring in more reforms, it is going to be good for the market and this will push up steel stocks as well.

JINDAL STEEL

Jindal Steel & Power (Australia) Pty Ltd, a subsidiary of Jindal Steel and Power Ltd, has extended till Mar 29 its takeover bid offer for entire stocks of Australian arm of Gujarat NRE Coke Ltd Gujarat NRE Coking Coal Ltd (Gujarat), according to a stock exchange filing. In January, Jindal Steel's arm had made a takeover bid for the entire stocks of Gujarat NRE Coke at A$0.20 (11.06 rupees) per share.  The takeover bid offer commenced on Feb 15 and was scheduled to end on Mar 15. The company has also raised prices of long steel products like beams, rails, channels, TMT bars by 500 rupees per tn while prices of plates and coils flat products have been raised by 1,000 rupees/tn.

Steel Stocks Outlook for the week (04 - 08.03.2013)

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Stocks of major steel companies are seen up next week following announcement of 15% investment allowance in the ensuing financial year. In order to attract new investment and speed up implementation of projects, Finance Minister P. Chidambaram announced deduction of 15% for investments over 1 bln rupees till 2014-15 (Apr-Mar) in his Budget speech Thursday.
I propose to introduce an investment allowance for new high value investments. A company investing 100 crore (1 bln rupees) or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15 percent of the investment. This will be in addition to the current rates of depreciation. There will be enormous spill-over benefits to small and medium enterprises.
Clarity on tax residency by the finance minister is also expected to lend support to the stocks in the sector. The finance minister clarified that residents of contracting state will be entitled to Double Taxation Avoidance Agreements benefit and that nothing new was introduced in 2013-14 (Apr-Mar).
Steel companies are also expected to raise product prices for March following the hike in rail freight. On Feb 26, Railway Minister Pawan Kumar Bansal announced an average 5.8% hike in rail freight with effect from Apr 1, linked to fuel price adjustment.
In light of deregulation of the HSD (high speed diesel) oil, Railways' finances need to be rationally insulated and to this end a mechanism to neutralise the impact of fuel prices on operating expenses is required to be put in place," Bansal had said in his Railway Budget for 2013-14.

Steel Stocks Outlook for the week: 25.02.2013 – 01.03.2013

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Stocks of major steel companies are expected to trade in a narrow range next week taking cues from local share indices that are seen rangebound ahead of the announcement of the Union Budget for 2013-14 (Apr-Mar) on Feb 28. There are no major expectations for the steel sector from the Budget and so we do not see any major movement in these stocks. The Street expects the Budget to be focused on fiscal consolidation and we see the government pegging the fiscal deficit target for the next year at 4.8% of gross domestic product. The Railway Budget for 2013-14 is due on Tuesday and this will be followed by the Economic Survey for 2012-13 on Wednesday, and then the Union Budget on Thursday. In the week ended Friday, shares of Jindal Steel & Power Ltd tumbled over 7% week-onweek