Next 3 months will test steel market mettle
The events unfolding in the next two weeks would determine if the market sentiment recovers to its normal level.The next three months are, therefore, crucial for the Indian steel market. The purchase by central departments is likely to increase and exhaust the budgetary residues.
A few steps on FDI inflows, the creation of a Cabinet Committee on Investment for single-window clearance, cutting down of subsidies by raising the prices of petroleum products and urea and the announcement of 10 industrial clusters had a positive impact on the market sentiment. However, the impact of all these measures would take time to be effective.
For the steel industry, the prime concern is the falling trend of fixed investment as a percentage of GDP. A number of real estate projects are stalled due to lack of funds as the cost of capital is way too high. The banks are not extending credit for projects that have some long-term duration, just to keep their NPAs under control.
For RBI, controlling inflation at the cost of growth was a preferred policy. Although doubts have been raised as to how effective this policy is in controlling price rise while bringing down
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