Metal stocks have been shining since last week, with the Nifty Metal index rising more than 3 percent, or 179.45 points, in intraday trade on Monday, May 22, to close at Rs 5,797.50 levels. At closing, of the 15 constituents of the Nifty Metal Index, all ended in the green except for SAIL, NMDC, and Ratnamani Metals & Tubes, which were down nearly 1 percent.
In the last one year, the Nifty Metal index has jumped 10.61 percent while the benchmark Nifty50 has risen 12.95 percent. Among all the index constituents, Adani Enterprises was the biggest gainer, rising 17 percent to Rs 2,289.65 after the Supreme Court-appointed expert committee's report that it cannot conclude any regulatory failure around the Adani Group-Hindenburg case. SEBI has "drawn a blank" in its investigation into alleged violations in money flows from offshore entities into the conglomerate.
Other major gainers in the metal space included Jindal Steel and Power, JSW Steel and Tata Steel, gaining up to 30 percent in the last one year.
"Nifty opened on a flat but gradually recovered to close with gains of 111 points ( plus 0.6 percent) at 18,314 levels. The broader market too ended in line, with the Nifty Midcap 100 and Smallcap 100 up 0.6 percent. All sectors ended in the green, except for banking and financials. Metals were the top gainers, up 3 percent, followed by IT up 2 percent," said Siddhartha Khemka, Head of Retail Research at Motilal Oswal.
In terms of technicals, Nifty Metal has a strong resistance near 5,922 levels from its current market levels. If it closes above 5,922, then further buying is possible, said Vaibhav Kaushik, Research Analyst, GCL Broking.
Steel: Chinese export price weakness weighs
Spot hot rolled coil (HRC) price in traders' market declined by Rs 500 per tonne on average due to heightened pressure of imports and sustained weakness in Chinese export prices.
Spot spreads also contracted Rs 600 per tonne on an average as raw material prices remained unchanged. Longs prices in the primary market corrected by another Rs 800 per tonne — however, in secondary market, prices rose by Rs 500 per tonne on tightness in the pellet market. HRC prices in the export market, however, corrected further, tracking lower Chinese prices — down $30 per tonne (5 percent) week-over-week.
In China, as per People's Bank of China, the economic growth is expected to be better in the second half of calendar year 2023, partially due to investment in infrastructure projects. On the production front, April 2023 crude steel production has declined 1.5 percent year-on-year, hence, analysts at ICICI Securities might see some respite in exports in the second half of CY23.
"While we maintain our positive outlook on ferrous space led by robust spot spreads, we would keep a close tab on market balance in China," the brokerage said.
Metal stocks to buy, sell, add as recommended by brokerages:
Meanwhile, JSW Steel MD and CEO Jayant Acharya said steel prices have held steady for the month of February-March, post which there has been some correction in the international markets, driven by subdued sentiment in China, higher exports from China.
"So, we have seen the international prices of steel come off somewhat. It is following a drop in the raw metal prices as well — so there has been a price correction in the month of May. We have seen a $25 kind of drop in the prices as we speak in the month of May from where we were in the month of February-March," he said.
Further, Acharya said: "If we were to look at April-June, there is a volatility and we could see some softness coming into the June month. However, I think the margins will remain by and large stable primarily because of the coking coal costs starting to flow through from June into the July-September quarter. So, expect the raw material prices to come down as well. Therefore, we do not see an impact on the markets."
