Tata Steel, Hindalco Industries, JSW Steel slump on poor earnings visibility

Shares of Tata Steel, Hindalco Industries, NMDC, Steel Authority of India, Hindustan Copper and Jindal Steel and Power fell 2-3 percent on Monday after a gloomy commentary by Jefferies wrecked the risk-appetite of investors.

Nifty Metal was the biggest loser among sectoral indices on the NSE. At 11:15 am, the sectoral gauge was down 1.7 percent at 4,618.45 points.

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Jefferies said that it's still early to turn constructive as the price to book valuations remain above historical troughs, earnings visibility is poor, and consensus downgrades will continue. The price-to-book ratio compares a company's market value to its book value.

Metal stocks also witnessed a sell-off on demand worries in top consumer China. China is also the top producer of metals. Mills in China have idled dozens of blast furnaces as stocks piled up after domestic demand weakened, hit by COVID-19 lockdowns and bad weather.

Meanwhile, Harsha Upadhyaya, CIO, Kotak Mahindra AMC, said that the balance sheets of almost all the metal companies in India have deleveraged by a significant amount.

"To that extent, even lower prices, which are there currently, are not really going to hurt them. Yes, they will make fewer profits, but it's not doomsday for them. On a bottom-up basis, you can still evaluate commodities, but our thesis is rather than looking at commodity producers at this point, it's better to look at commodity users who will get a better benefit over the next couple of quarters," Upadhyaya said.