In past one month, after the September quarter results (Q2FY19), Tata Steel has underperformed the market by falling 16%, as compared to a 1.6% decline in the S&P BSE Sensex.
According to Moody's Investors Service, in 2019, demand for steel in Asia will likely stay at levels similar to that in 2018, indicating a softening from the robust growth seen in 2018.
"As for profitability, rated Asian steelmakers will see their profitability levels weaken mildly because of a decline in Chinese demand growth but stay strong overall, “says Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer.
Chinese steel futures fell for the third session in a row on Tuesday on concerns slower demand will persist next year, with prices of steelmaking raw materials iron ore, coking coal and coke also retreating, a Reuters report suggested.
“Tata Steel should emerge stronger once it digests M&A and achieve synergies. However, overall group cash flows remain hostage to steel prices, which are trending down in the international market but holding up well in India. Currency depreciation helps margins for India business, but net debt goes up in translation loss. There may be some delay in spinning off Tata Steel Europe in JV with TK,” Motilal Oswal Securities said in Q2FY19 result update with ‘neutral’ rating on the stock.
At 10:09 am; Tata Steel was trading 1.6% lower at Rs 494 on the BSE, as compared to 1% decline in the S&P BSE Sensex. A combined 2.65 million equity shares changed hands on the BSE and NSE so far.