Morgan Stanley, Citi positive on Tata Steel

Citigroup says oversupply in China and Europe leaves little room for upside in steel prices, after global re-stocking sparked a rally over the past three months. However, the bank retains a 'buy' rating on Tata Steel Ltd and raises its target price to Rs 508 from Rs 430, citing "inexpensive" valuations, a bottoming out of earnings in Tata Steel Europe and more resilient volumes than other Indian steel makers.

Separately, Morgan Stanley adds Tata Steel to its Asia-Pacific excluding Japan as well as Emerging Markets focus lists, saying the company offers "a good restructuring story" due to rising capacity, improved sales volumes and the commissioning of a new coke oven battery.

 

Citigroup also downgraded Steel Authority of India Ltd to 'sell' from 'neutral' after the stock gained over 12% in past three months, already discounting expectations of margin improvement in fiscal 2014.

Tata Steel shares gain 1.2%, while SAIL shares are up 0.4%.