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Vedanta, Tata Steel: Steel stocks are showing strong upside. Stay invested

Domestic steel demand recovery remains healthy led by auto sector and government infra pipeline
The Nifty Metal index was outperforming at the bourses on Tuesday with steel stocks firing from all cylinders. At 11:20 am, the index was ruling over 3 per cent higher at 3,977 levels, as against a 1.8 per cent rise in the benchmark Nifty50 index. Among individual stocks, MOIL, SAIL, JSW Steel, Tata Steel, Jindal Steel, and NMDC surged in the range of 4 per cent to 9 per cent on the National Stock Exchange (NSE).  

In the past one month, the Nifty Metal index has gained around a per cent on the NSE, compared with a 0.1 per cent decline in the Nifty50 index on the back on robust demand. Domestic steel demand recovery remains healthy led by auto sector and government infra pipeline. Besides, steel realisations remain high with price hikes (amid tight supply and high raw material costs), robust domestic demand and high international prices.

"The India steel sector has rebounded strongly from Covid-19 disruption, with JSW Steel (JSW) and TATA Steel (TATA) India businesses reporting the highest ever quarterly Ebitda in Q3FY21. We think high pricing/spreads will gradually normalise. Further, we believe higher steel prices, improved sourcing of raw materials, and cost-saving initiatives would improve profitability in FY22. Efficiency gains from new expanded/upgraded capacity, however, will be a gradual process, in our view," said analysts at UBS in a March 19 report. 

Given a strong fundamental view, here is how the stocks look from technical view point:

NIFTY METAL: The recent weakness in the index has been contained near the support of the 50-days moving average (DMA), currently placed at 3,619 levels. Going forward, a decisive close above the resistance of 3,950 mark may spark a rally towards 4,100 levels, as per the daily chart. The Relative Strength Index (RSI) has made a positive crossover, suggesting the strength may continue in the forthcoming sessions. CLICK HERE FOR THE CHART

 

TATA STEEL LTD (TATASTEEL): A strong reversal nearing the 50-DMA and a close above Rs 760-mark has given an upside breakout in the stock. The rally is now heading towards Rs 850 and Rs 865 levels in the near-term, as per the daily chart. This move is supported by the consolidation breakout in RSI above 57 value. The volume-based buying has also risen substantially in the last few sessions indicating strength. The immediate closing basis support comes at Rs 760 levels. CLICK HERE FOR THE CHART

 

STEEL AUTHORITY OF INDIA (SAIL): A clear sustained move above Rs 80-mark may provide a medium-term breakout towards Rs 100 and Rs 120 levels, as per the weekly chart. A positive crossover of the 50-weekly moving average (WMA) and the 100-WMA further confirms upside bias on the breakout. Although, volume strength seems to be sluggish, the stock price has shown no weakness in the recent sessions. The gap-up closes have helped in sustainence of buying momentum at the higher levels, as per the daily chart. CLICK HERE FOR THE CHART

 

VEDANTA LTD (VEDL): The counter has surged over 40 per cent in the last two months from a low of Rs 161 levels. This strength and momentum, which has supported the upside bias in the volatile market, suggests the inherent strength. As long as the counter holds the support of Rs 218 levels on the closing basis, the upside bias may head towards Rs 250 levels, as per the daily chart. CLICK HERE FOR THE CHART

 

JSW STEEL Ltd (JSWSTEEL): After a breakout above the resistance of Rs 430, the stock has re-tested its support levels during the recent market correction. Now, as it crosses the immediate resistance of Rs 450 levels, the upside bias may see a rally towards Rs 500 levels. Till the stock defends Rs 450 levels, the medium-term outlook may remain highly optimistic, as per the daily chart. The volumes strength has remained healthy, suggesting keen interest of market participants, as per the daily chart. CLICK HERE FOR THE CHART

 

JINDAL STEEL & POWER (JINDALSTEL): The stock has broken above the "Falling channel pattern" at Rs 420 levels, as per the daily chart. This move was supported by heavy volume, reflecting a positive bias in the stock. It now needs to conquer Rs 345-mark to enter the next level of upside towards Rs 360 levels. With the RSI making a positive crossover, the direction and strength may support the upward momentum. CLICK HERE FOR THE CHART



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