Citing persistent downside risks and further price cuts in the sector, Wall Street brokerage Bank of America Securities maintained a cautious view on the steel sector.
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The brokerage has cut the earnings estimates for the steel sector sharply by 9-64 percent for the financial year 2023 and 2024 on the back of weak demand. BofA also noted that high inventory in quarter one and quarter two is seasonally weak, and thus expects a further price correction in the steel names.
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BofA believes while the spreads have improved for Indian companies on the back of a sharp decline in global coking coal prices, the steel prices are muted, and there is additional risk emanating from China on the back of weak demand. The firm also expects no reversal in the export duty removal or reduction in the near term.
The only 'buy' stock for the brokerage in the steel pack is Tata Steel, with a target price of Rs 1,100. The firm sees a potential 22 percent upside on the stock from the current levels.
Tata Steel's stock has been gaining for the last two days and has risen 3.87 percent in the period.
Also Read: NMDC, Hindalco, SAIL, Tata Steel fall as commodity prices hit fresh lows with looming recession fear
The brokerage house has downgraded JSW Steel to 'underperform' from 'neutral', cutting the target price to Rs 565 from Rs 627. Shares of JSW Steel were trading 1.41 percent lower on Tuesday on the BSE.
The firm also has an 'underperform' rating on Steel Authority of India Ltd (SAIL) with a target price of Rs 60 and has cut the target price on NMDC to Rs 126 from Rs 146.
While shares of SAIL touched an intraday high of 2.23 percent on Tuesday, that of NMDC were choppy and rose 0.19 percent on the BSE.
Watch the accompanying video of CNBC-TV18's Nimesh Shah for more details.
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