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The 12 per cent safeguard duty proposal gave a gleam to metal stocks on Wednesday as some key scrips rallied up to 10 per cent in intraday deals on the National Stock Exchange (NSE).
Among individual stocks, Hindustan Zinc zoomed as much as 9.48 per cent to ₹477.80, followed by SAIL (up to 5.04 per cent at ₹114.40), APL Apollo (up 4.69 per cent at ₹1,500), NMDC (up 3.77 per cent at ₹69.19), Welspun Corp (up 3.45 per cent at ₹837.20), Hindustan Copper (up 3.05 per cent at ₹228.34), Tata Steel (2.93 per cent at ₹159.20), JSW Steel (up 2.84 per cent at ₹1,047), JSL (up 2.51 per cent at ₹664.15), and Jindal Steel (up 2.19 per cent at ₹943.75).
Others, including NALCO, Vedanta, Hindalco, and Adani Enterprise also rose in the range of 0.2-1 per cent.
The Nifty Metal index rose as much as 1.67 per cent to hit an intraday high of 9,185.20, before settling 1.27 per cent higher at 9,148.55 levels. In comparison, Nifty 50 closed 0.32 per cent higher at 22,907.60 levels.
The rally in metal stocks came after the government, on Tuesday, recommended a 12 per cent safeguard duty on certain steel products for 200 days to protect the domestic industry from the serious injury caused by a recent spike in imports. A safeguard duty is a temporary tariff barrier imposed to shield domestic industries from a surge in imports.
“Therefore, the authority recommends imposition of provisional safeguard duty at the rate of 12 per cent ad valorem for 200 days pending final determination on imports of the product under consideration,” the Directorate General of Trade Remedies (DGTR) said in a statement on Tuesday.
The order noted that imposing the measure is critical under the current circumstances, and any delay would cause damage that would be difficult to repair. “There is a necessity for immediate application of “provisional safeguard measures,” it added.
“To counter the trade diversion from the US as well as any possible diversion from other countries that have put in place import barriers, any protective measure by India shall be at a level adequate to ward off the trade diversion,” the statement stated.
The DGTR, under the administrative control of the commerce department, has invited comments on its findings within 30 days, after which an oral hearing will be held before passing the final order.
Analysts at Emkay said that the outlook for India’s steel sector is positive in the medium term, driven by GDP growth, rising consumption, and low per-capita steel usage. With the global trend towards protectionism, India may become less influenced by Asian steel prices.
The analysts project a steel consumption compound annual growth rate of 7-8 per cent over the next five years. Indian steel producers are planning capacity expansions to meet this demand.
However, there are near-term challenges, including a domestic slowdown and a lack of policy support, which have kept steel prices subdued. Despite these concerns, investors are likely to overlook the current downturn, anticipating a mid-cycle recovery.
The analysts believe that a combination of short and medium term factors will eventually drive growth and improved profitability for steelmakers. As a result, they maintain a neutral-to-positive view on the sector and advocate a selective picking approach rather than a broad investment. Their preferred picks include Tata Steel and JSW Steel (JSTL).
According to reports, foreign brokerage firm JPMorgan said steel safeguard duty of 12 per cent for 200 days is positive for Indian steel. The domestic HRC prices may rise by ₹2,000/tonne.
Tata Steel, JSW Steel, and SAIL are expected to see positive stock reactions, the brokerage said.
Meanwhile, CLSA reportedly predicted an improved outlook for metals demand with China stimulus and European growth.
Also, they noted safeguard duty benefits for domestic steel mills. Hence, analysts at CLSA prefer non-ferrous metals, while raising target prices for JSW Steel and Tata Steel.
