As China begins lifting its zero-Covid policy, Indian shares rallied buoyed by the metals pack. With the hopes of a revival in demand in China, the Nifty Metal index rose 4.23% in trade on Tuesday, extending its rally for the second consecutive session. Increased domestic expenditure on infrastructure and optimistic Q3FY23 expectations are also fuelling the sector’s rally. Jindal Steel & Power, Welspun Corp and National Aluminum Company are the top gainers in the index.
Nifty Metal’s outperformance
“The Ministry Of Steel has taken recent initiatives for the growth of the steel sector. Decarbonization in the steel sector is a key driving factor in the metals sector”, said Rameshver Dongre, Research Analyst – Equity Research, CapitalVia, adding, “Overall trend of the Nifty Metal index is bullish on the long term chart. After a correction, the index has marked the support of 6200 and resumed the up trend.” However, despite the bullish charts, Jatin Damania, Research Analyst, PCG Research, Kotak Securities said that steel stocks offer unattractive risk-reward after the recent rally.
Outlook for metal sector
Despite the bullishness demonstrated by the market, some analysts are not optimistic about the metal sector. “Domestic steel prices have corrected by 3-4% in December 2022 led by demand pushback on price premium to imports. Further expansion in margins appears challenging given (1) bottoming out of iron ore prices, (2) downward pressure on steel prices and (3) weak export markets.” said Jatin Damania, Kotak Securities. On a technical level, Nifty Metal has resumed its major trend, said Rameshver Dongre, CapitalVia. If the index sustains above the 6,200 level, it can continue its upmove. Once it crosses the 6600 level, then 6800 and 7050 levels can be seen, he adds.
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