Amit Dixit, research analyst at Edelweiss, shared his views and outlook on the metal sector. Dixit expects ferrous stocks to outperform non-ferrous stocks in Q3 earnings.
"Tata Steel could be a relative outperformer from ferrous pack," Dixit told CNBC-TV18 on Monday.
According to him, restructuring of Tata Steel's Europe operations will aid to company's earnings.
On the valuations front, Dixit said, “I agree that they are at a low but if you look at earnings, and so far the street has not cut the earnings and that is the point where you see a disconnect because the moment you cut earnings your valuations would likely get restored to normal levels. So I feel that the stock is already reflecting the tone down prices but earnings are not. Therefore, in my view with demand concerns also now coming in, it’s better to trade with a bit of caution".
With regards to individual stocks, he said, “Tata Steel and Hindalco are my top picks because of different reasons. The reason being that Tata Steel, as I mentioned earlier, the benefits of restructuring have not yet been captured and in case of Hindalco, which is relatively immune to London Metal Exchange (LME) earnings will come to fore as Hindalco reports (its quarterly numbers) and the concern on Hindalco has been the fact that Novelis might see a slowdown because of its exposure to auto.”
“However, looking practically at other stocks, I see a bit of a challenge over there particularly those who are exposed to pure LME such as Hindustan Zinc,” Dixit added.
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