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    Nifty Metal down over 6% as Tata Steel, Jindal Steel, Hindalco, others fall

    Nifty Metal down over 6% as Tata Steel, Jindal Steel, Hindalco, others fall

    Nifty Metal down over 6% as Tata Steel, Jindal Steel, Hindalco, others fall
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    By CNBCTV18.com  IST (Updated)

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    Metal stocks such as Tata Steel, Jindal Steel & Power, Hindalco Industries, NMDC, SAIL, among others, plunged over 3-10 percent.

    The metal stocks witnessed a sharp profit-booking and were the top losers on Monday. The Nifty Metal index, a gauge of top metal stocks, declined 6.6 percent.
    The index has rallied over 130 percent in the last one year and is up around 70 percent YTD.
    Metal stocks such as Tata Steel, Jindal Steel & Power, Hindalco Industries, NMDC, SAIL, among others, plunged over 3-10 percent.
    Steel stocks came under pressure amid concerns over weak near-term demand from China. Weak real estate data, as well as contagion fears on account of debt defaults in the high-yield developer market, set a context for the current steel production cuts.
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    “Risk-reward in steel equities is further worsened by the precipitous fall in iron ore prices. The last cost support for steel is in elevated coking coal prices and it appears that it is only a matter of time, given the current pace of Chinese steel production decline, that coking coal starts to correct,” ICICI Securities said in a note.
    Higher coking coal prices are currently compressing Chinese steel margins and supporting steel prices. Global steel equities continue to derate in expectations of a price decline.
    Meanwhile, low iron ore prices should lead to lower scrap and eventually lower long product prices, the brokerage house believes. Thus, it sees a sharp decline in MTM earnings for SAIL and Jindal Steel & Power.
    It is more constructive on aluminium and maintains a Buy call on Hindalco Industries. Jindal Steel & Power, given its potential to be debt-free by FY23E post Jindal Power divestment, is ICICI Securities’ top pick in the ferrous space.
    Sudip Bandyopadhyay, Group Chairman, Inditrade Capital, is of the view that the selling in metal stocks should be looked as a temporary short-term blip, while the long-term outlook remains bullish.
    “I remain extremely nimble on the metal sector. Short-term volatility will prevail in the metal stocks as the global markets are down on risk-aversion. There are concerns related to China, but we are upbeat on metal stocks in the long term,” said Bandyopadhyay.
    He is bullish on steel and aluminium stocks such as Tata Steel, Hindalco Industries and NALCO.
    “In the post-pandemic era, metal stocks will continue to rally. There are shortages and the demand for steel and aluminium is expected to rise going ahead,” he added.
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