Metal shares under pressure; JSW Steel, Hindustan Zinc hit 52-week lows

Jindal Steel and Power, Tata Steel, JSW Steel, Steel Authority of India, Hindustan Zinc and Vedanta were down in the range of 3 per cent to 4 per cent on the NSE.

Shares of metal companies were under pressure, with most of the frontline sector companies trading lower by up to 4 per cent on the National Stock Exchange (NSE) amid subdued demand.

Jindal Steel and Power (JSPL), Tata Steel, JSW Steel, Steel Authority of India (SAIL), Hindustan Zinc and Vedanta were down in the range of 3 per cent to 4 per cent on the NSE.

Among individual stocks, JSW Steel (down 4 per cent at Rs 252), Hindustan Zinc (3 per cent at Rs 222) and Hindustan Copper (2 per cent at Rs 38) hit their respective 52-week lows in intra-day deal, while SAIL, Tata Steel and JSPL were trading close to 52-week lows on the NSE.

At 12:17 pm, Nifty Metal index was the largest loser among sectoral indices, down 1.4 per cent, as compared to a 0.39 per cent decline in the benchmark Nifty 50 index.

According to brokerages for April-June quarter (Q1FY20), earnings for companies in the ferrous space are expected to be compressed by the continued decline in spreads and the pressure on volumes. On the non-ferrous front, sliding LME prices are expected to keep earnings subdued.

The trade disputes between USA and China, weak sentiments and overcapacity would keep earnings highly volatile for the sector.

Going ahead, analysts at Edelweiss Securities, expect the inventory build-up in Q1 and a seasonally weak second quarter to keep earnings momentum for ferrous companies subdued in the near term; the limited uptick in non-ferrous companies’ earnings due to subdued LME prices.

“We expect steel companies to report an improvement in volumes on a year-on-year (YoY). However, decline in realizations (HRC prices have weakened QoQ by Rs 250- 300/ton) is likely to impact spreads. The metal universe to report a profit after tax decline of around 30 per cent YoY,” analysts at Antique Stock Broking said in Q1FY20 earnings preview.

The moderation in steel demand growth may be due to continued weakness in the automobile segment, slowdown in infrastructure spending on account of general elections in the previous two months, and seasonal slowdown due to the monsoon.