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Buy Tata Steel, Vardhman Special for up to 16% gains; Nifty Metals hits new record high, uptrend to continue

The Nifty Metal index has continuously set fresh all-time highs in recent weeks as commodity prices soar higher and investors rush towards metal stocks to capitalise on the move.

Buy Tata Steel, Vardhman Special for up to 16% gains; Nifty Metals hits new record high, uptrend to continue
Russia and Ukraine collectively accounted for 45 MT of global steel exports in the previous calendar year. (Image: REUTERS)

The Nifty Metal index has continuously set fresh all-time highs in recent weeks as commodity prices soar higher and investors rush towards metal stocks to capitalise on the move. Technically, the index logged a resolute breakout above the last 5-month’s consolidation range with a higher base formed in the vicinity of 100 days EMA, highlighting robust price structure, according to ICICI Direct. “Going ahead, we expect the Nifty Metal index to continue its relative outperformance and head towards 6750 levels as it is the 138.2% external retracement of the recent breather,” they added. Currently Nifty Metal is at a high of 6,565. 

Stocks to buy

Tata Steel
Target price: Rs 1,460

Analysts at ICICI Direct believe Tata Steel has given a breakout above the falling channel which has contained the entire decline and augurs well for the next up move. “The stock recently generated a breakout above the falling channel containing six month’s corrective decline and is currently seen sustaining above the same signalling resumption of the up move and offers a fresh entry opportunity,” they added. 

Tata Steel is among the top global steel companies with an annual steel production capacity of ~34 million tonnes per annum. Analysts expect the stock to maintain positive bias and head towards its September 2021 high of Rs 1460 in the coming months. This implies an upside of 9% from Friday’s lows.

Vardhman Special Steel
Target price: Rs 292

Technical charts suggest a favourable risk-reward set up here with higher base formation at 52 week’s EMA. “The share price of Vardhman Special Steel has formed a higher base above 52 week’s EMA and is seen resuming its primary uptrend signalling strength and offers a fresh entry opportunity with favourable risk-reward set up,” ICICI Direct said. 

The company is a steel bar producer for automotive applications. It has specialised product offerings, which include steel bars and rods and bright bars of various categories of special and alloy steel. The stock is expected to hit Rs 292 per share, an upside of more than 16%.

Why is the metal index up?

Metal prices have soared higher as Russia and Ukraine remain stuck in a conflict. So far this year, domestic HRC price have increased 16% to Rs 73,500/tonne and domestic CRC prices increased 14% to Rs 79500/tonne. Russia and Ukraine collectively accounted for 45 MT of global steel exports in the previous calendar year. “Going forward, supply fears on the back of current geopolitical scenario coupled with rising input costs is likely to support a further uptick in steel prices,” ICICI Direct said.

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