Metal stocks are in limelight ever since the government imposed much awaited Minimum Import Price (MIP) on import of 173 steel products in a bid to restrict cheap steel import which could have impacted the domestic steel industry negatively.
The BSE Metal index tanked 37.35 per cent in the past one year till February 11, 2016 whereas the BSE Sensex fell 19.56 per cent during the same period. However, short coverings in metal stocks supported market sentiments on Monday as the BSE Metal index closed 8.79 per cent up at 6,888.93.
Vedanta shares led the metal pack on Monday with a gain of 18.25 per cent at Rs 74.85, followed by NMDC (up 14.40 per cent), Jindal Steel (up 13.80 per cent), Tata Steel (up 13.01 per cent) and Hindalco (up 9.59 per cent). Rest all other metal stocks also closed in positive zone. Sensex advanced 2.47 per cent, or 568 points, to 23,554 on Monday.
Jayant Manglik, president, retail distribution, Religare Securities, said, “Though it was broad-based recovery on Monday but interestingly all the three underperforming sectors – PSU banks, Metal and Realty gained maximum on sectoral front. Perhaps, short covering in these sectors helped them to post such gains.” Sensex closed 568 points up at 23,554 on Monday.
On the MIP, Sajjan Jindal, CMD, JSW Steel during the ‘Make in India’ week event at Mumbai said that the steel industry, which is passing through a tough time, has pinned its hope on the minimum import price (MIP) announced recently and expects more relief measures in the budget. The steel sector is hopeful that the country’s economy should grow by 8-8.5 per cent, which would help the industry to revive.
The notification on MIP covers over 90 per cent of the total steel imports with price in the range of $445‐750 per tonnes (on finished products). According to Prabhudas Lilladher, with the MIP, imports would become expensive by 26‐70 per cent or $110‐270 per tonne.
The minimum price will remain in place for six months only. However, it will not apply on imports under the advance authorisation scheme and high-grade pipes used in the petroleum and natural gas industry. Stainless steel has also been excluded from MIP protection.
The industry welcomed the move by government. Jindal Steel & Power said that the industry has gone through very challenging times and this development augurs well.
Post announcement, Prabhudas Lilladher upgraded ratings for Jindal Steel and JSW Steel shares. The brokerage house in a research note said, “We upgrade the rating on Jindal Steel to ‘Accumulate’ from ‘Reduce’ on account of expected higher utilisations (due to lower imports), improved operations at Angul and attractive valuations. We also upgrade JSW Steel to ‘Buy’ from ‘Accumulate’ on the back of its efficient operations and direct play on trade action.”
India imported finished steel to the tune of 8.4 million tonne (mt) in the April-Dec’16 period, an increase of around 29 per cent year-on-year. China, Japan and Korea accounted for nearly 70 per cent of the total 9.31 mt steel imports into India in FY15, which saw a 71 per cent growth over FY14.
JM Financial believes that the current rate of 12 mt steel import annually is likely to come down significantly with the imposition of MIP for a sustained period.
G Chokkalingam, founder & CEO, Equinomics Research, said, “The move is good for steel industry but the benefit will be seen gradually due to demand contraction globally. Overall, it is positive for companies such as JSW Steel which caters primarily to domestic markets than Tata Steel.
Reliance Securities also believes that non-integrated players like JSW steel are still better placed in the current scenario. The brokerage house has ‘Buy’ on the stock with a target price of Rs 1,235.
(With inputs from PTI)