JM Financial bets on Tata Steel, Hindalco, Jindal Steel ahead of Q2 show

Despite the soft quarter, JM Financial continues to highlight Tata Steel, Jindal Steel, and Hindalco as top picks in the metals space.

JM Financial on metal and mining sector: Indian steel companies are likely to report a subdued second quarter (Q2FY26), as softer domestic prices weigh on margins, analysts said. 

 

According to JM Financial, average domestic hot-rolled coil (HRC) prices came in at ₹49,600 per tonne, down roughly ₹2,000 per tonne sequentially (Q-o-Q), while long steel prices fell more sharply to ₹48,600 per tonne, a decline of about ₹7,000 per tonne from the previous quarter.

 

Volumes are also expected to remain muted due to seasonal weakness, with the Joint Plant Committee’s data showing a marginal 1 per cent month-on-month (M-o-M) drop in July.

 

However, companies may see some relief from lower coking coal consumption costs, estimated at $5-10 per tonne. NMDC’s price adjustments – an ₹500 cut in July followed by a ₹400 hike in August – are also expected to partially cushion margins. "We expect Ebitda per tonne contraction of roughly ₹3,500 in Q2, reflecting lower realisations partly offset by falling coking coal costs," Ashutosh Somani and Anirudh Nagpal of JM Financial said, in a note dated September 11.

 

Why does JM Financial favour Tata Steel, Jindal Steel, and Hindalco?

 

Despite the soft quarter, the brokerage continues to highlight Tata Steel, Jindal Steel Limited, and Hindalco as top picks in the metals space. Jindal Steel stands out for its low leverage and strong volume growth prospects over the next few years, making it resilient to near-term volatility. 

 

Hindalco, a non-ferrous player, is expected to benefit from a robust aluminium price environment, with LME aluminium averaging $2,600 per tonne, up $140 per tonne compared to Q1FY26. Tata Steel remains a preferred pick due to its diversified portfolio and operational scale. 

At around 9:40 AM on the bourses, Tata Steel share was up 0.27 per cent at ₹169.85, Hindalco stock rose 0.62 per cent to ₹747.05, while Jindal Steel slipped 0.28 per cent to ₹1,038.

 

Global factors shaping the outlook

 

China’s steel market is adding complexity to the domestic scenario, analysts opined. Chinese HRC prices rose $20 per tonne in Q2 compared to Q1, reflecting expectations of policy support. Rebar prices corrected slightly but remained elevated, while exports for January-August 2025 totaled 77.5 million tonnes, up 10 per cent Y-o-Y. Global raw material trends, including coking coal at $185 per tonne and iron ore at $97 per tonne, are also influencing margins.

 

"Any meaningful production cuts in China could support global prices, which, combined with India’s protective measures like the 12 per cent safeguard duty, may improve spreads in 2H," analysts at JM Financial said.

 

Besides, the non-ferrous Indian players are expected to report margin expansion in Q2FY26. Rising LME prices for aluminium and zinc are supporting profitability, with Hindustan Zinc also expected to benefit from a $120 per tonne increase in zinc prices Q-o-Q.

 

H2 outlook remains upbeat

 

Going forward into the second half (H2) of the fiscal year, analysts anticipate a rebound in spreads, driven by stronger Chinese domestic prices, tighter safeguard duty enforcement, improved visibility on import duties, and seasonally stronger consumption. These factors are expected to underpin recovery in margins for both ferrous and non-ferrous metals.

 

While Q2 may see soft numbers, selective companies like Tata Steel, Jindal Steel, and Hindalco are rightly placed to benefit from favourable global trends and operational strengths, making them attractive bets for investors.