Metal stocks have been buzzing in the past few sessions, trading at new highs amid earnings announcements and improved business outlook for the sector. Shares of metal and steel companies were pushing the indices higher in Thursday’s session with the Nifty Metal index surging nearly 5%, being the top gainer.
Hindalco share price surged over 10% in trade today, with its market capitalization crossing ₹1 lakh crore mark in the afternoon deals on the BSE whereas Tata Steel and JSW Steel shares rallied over 5%. Following the lead, shares of JSPL, SAIL, NMDC, NALCO also surged as they were up in the range of 3-5%.
A Bloomberg report stated that India’s steel consumption is set to break records this year, reversing the performance in 2020 when demand crashed as the pandemic upended economic activity.
Demand for steel is expected to surge 17% to 110 million tons in the year started April, according to Seshagiri Rao, joint managing director of JSW Steel Ltd. Rising power consumption and mining activity, along with higher tractor and passenger vehicles sales is pushing up demand for the metal, Rao said in an interview to Bloomberg. “We have seen a good revival in the month of June and July,” he said. “Construction demand will also pick up after the festive season.”
Last week, JSW Steel, India’s most valuable steelmaker, had reported a record profit of ₹5,900 crore for the first quarter amid a surge in the prices of the alloy. The company had reported a loss of ₹582 crore in the corresponding quarter of the previous year.
Domestic brokerage Motilal Oswal in a recent note on JSW Steel stated that while the company’s debt would stay elevated in FY22 despite the strong steel prices and margins, it does not see that as a worry given the expected strong growth in volumes and cash flows led by expansions. It has reiterated its ‘Buy’ rating on JSW Steel stock with target price of ₹840 per share.
On what’s leading the rally, Ravi Singhal, Vice Chairman of GCL Securities said, “Reason for rise in metal stock price can be attributed to these two reasons — metal prices in the international merchandise appreciating more than 100 per cent and Indian government’s focus on infrastructure creating fresh demand for metals, especially for steel. Rise in demand has led to higher book value and revenue generation of these metal companies.”
“In the last one year, metal prices have almost doubled and it is leading to appreciation in revenue collection of these companies. This has helped metal companies to reduce their debt, which has remained visible in their quarterly results throughout the year,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.
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