Nifty Metal index gains over 2%; JSL, Vedanta, Tata Steel rally up to 6%

At 12:40 pm, the Nifty Metal index, the top gainer among sectoral indices, was up 2.5 per cent, as compared to the 0.55 per cent rise in the Nifty 50

Shares of metal companies are in focus with the Nifty Metal index surging over 2 per cent on the National Stock Exchange (NSE) in Thursday’s intra-day trade after a rally in frontline stocks like Tata Steel, Vedanta and Jindal Stainless (JSL).

 

At 12:40 pm, Nifty Metal index, the top gainer among sectoral indices, was up 2.5 per cent, as compared to the 0.55 per cent rise in the Nifty 50. In the past one month, the metal index has outperformed the market by surging 6.5 per cent, as against 5 per cent decline in the benchmark index.

 

JSL, Tata Steel, Hindustan Copper, Hindustan Zinc, Vedanta, NMDC and Hindalco Industries from the metal index were up in the range of 3 per cent to 6 per cent on the NSE in intra-day trade today.

 

 

According to reports, China is planning to restructure its steel industry through output cuts. This initiative aims to generate profits and help the country meet its carbon emission targets. Moreover, it is expected that steel production will be reduced by 50 Million Tons (MT) in the current year.

 

The move, aimed at tackling overcapacity, sparked positive sentiment among investors of Indian steel companies. China, the world's largest steel producer and consumer, is facing pressure to address oversupply issues. The restructuring initiative is seen as a potential catalyst for stabilising global steel prices and improving market conditions for producers outside of China.

 

China’s ongoing property crisis has led to a decline in steel demand within the country, pushing its exports to 8 years high of ~110 MT in 2024. Consequently, the higher steel imports from China and FTA countries such as South Korea and Japan have driven India's steel imports to an 8 year high of ~8.3 MT (up by 20 per cent YoY), between April’24 and Jan’25. This surge in imports has led to domestic steel prices declining to a four-year low of ~Rs 48,000/tonne, impacting the profitability of Indian steel players, according to ICICI Securities.

 

However, the anticipated production cuts in China could reduce steel imports into the country, stabilising domestic steel prices and improving earnings for Indian steel players. Thus, within this space, the brokerage firm said they prefer Jindal Steel & Power and JSW Steel due to their strategic capacity expansion, strong domestic demand outlook, and improving profitability prospects. Notably, the potential imposition of import duties could serve as a key positive trigger, warranting a rerating of these stocks, it added.

 

ICICI Securities said Ebitda/ton is expected to bottom out from Q4FY25 onwards, driven by a gradual recovery in steel prices, along with an anticipated decline in iron ore and coking coal costs, by ~Rs 350 per tonne and ~$10 per tonne. Moreover, likely imposition of higher import duties/tariffs would benefit domestic steel players.

 

Steel producers are generally impacted by a weak rupee/dollar due to the imports of coking coal; however, the risk is somewhat mitigated by hedging and import parity of metal prices. China has been a key exporter in the international market in the recent past and accounts for about 50 per cent of the global steel production. Therefore, any change in its economic policies that could impact the government’s infrastructure spending or tightening of environmental norms could materially impact steel prices, according to ICRA.

 

Among the individual stocks, JSL has surged 6 per cent to Rs 652.85 on the NSE. Tata Steel gained 3 per cent to Rs 151, and rallied 8 per cent in the past two trading days. The stock is trading at its highest level since December 12, 2024.

 

Going forward, with steady Indian operations backed with capacity expansion and a growing domestic market, the Netherland plant being fully functional, and positive developments with regards to UK operations, partly offset by expected softening of steel prices, Brickwork Ratings expects an improvement in the operational and financial performance of Tata Steel.

 

Shares of Hindalco Industries were up 4 per cent to Rs 682 on the NSE in intra-day trade. The stock is quoting higher for the sixth straight day, surging 10 per cent during the period. It is trading at its highest level since November 7, 2024.

 

Hindalco expects a recovery in Novelis’ performance in Q4FY25, led by higher volume, better product mix, benefit of new contract pricing and favorable metal benefit. For its India operations, healthy demand, gradual completion of ongoing growth projects and cost-saving initiatives will be key catalysts, according to analysts at Elara Capital. In the medium-term, the brokerage firm expects aluminium to outperform ferrous because of better demand-supply scenario which should benefit Hindalco.