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Nifty Metal tanks 9%, Tata Steel, JSW Steel, SAIL at new 52-week lows; know why. What should investors do now?

The Nifty Metal index tanked 9 per cent as Tata Steel, JSW Steel, NMDC and Steel Authority of India Ltd (SAIL) hit fresh 52-week lows on Monday.

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Analysts say that the government’s decision to levy 15 per cent export duty on key steel products, appears to have unnerved the investors in the metal sector. Image: Reuters

The Nifty Metal index tanked 9 per cent as Tata Steel, JSW Steel, NMDC and Steel Authority of India Ltd (SAIL) hit fresh 52-week lows on Monday. The fall in steel stocks came after the government imposed export duty of 15 per cent on steel for the second time after 2008. To increase domestic availability, the duty on exports of iron ore was hiked up to 50 per cent, and a few steel intermediaries to 15 per cent, according to a notification. “Global steel markets were spooked due to the Russia-Ukraine war, depressed market conditions in China and high inflation. Imposition of export duty by India could further destabilise already weak demand in anticipation of lower supplies from Indian mills,” Kamlesh Bagmar, research analyst, Prabhudas Lilladher said in a note.

The brokerage firm cut ratings of steel stocks such as Hindustan Zinc, Jindal Steel & Power, JSW Steel, NMDC, SAIL, and  Tata Steel to ‘reduce’, given the uncertain market outlook. It has also slashed the target prices of the stocks by up to 55 per cent. It also added that this event reminded of 2008 when the UPA govt imposed export duty to curb inflation as steel prices crossed US$1000/t in wake of massive global liquidity and strong demand. While, duty on flat steel products was withdrawn in a month’s time as steel companies agreed to Govt’s demand to reduce prices. However, the sector went into severe pain in the next one year due to global meltdown. Domestic steel has fallen by 10-12 per cent in the last one month due to softness in global prices.

Analysts say that the government’s decision to levy 15 per cent export duty on key steel products, appears to have unnerved the investors in the metal sector. “But given the sharp sell-off today, it is best for investors to not take hasty decisions, and wait for the market to factor in the recent developments,” Aamar Deo Singh, Head Advisory, Angel Broking, told FinancialExpress.com.

The Nifty Metal index has witnessed the biggest fall in two years. Analysts suggested investors avoid taking new positions in steel stocks. “At the current scenario one should avoid to make new position in metal stocks as export duty on iron ore may result in higher domestic supply and is likely to bring down prices and company like Tata Steel and JSW Steel having 15-20% export of overall sales,” Akhilesh Jat, analyst, CapitalVia Global, told FinancialExpress.com.

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades, told FinancialExpress.com that technically, 5195 will be strong support for Nifty Metal index. “Trend turns bullish only if close above 5500,” Shetty added. While for steel stocks, Anuj Gupta, VP- Research, IIFL Securities, advised investors to hold the stocks as demand is expected to rise.

The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.

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