Metal stocks rise for the fifth consecutive day; Why is there strong buying in this basket?

In early deals, BSE Metal and Nifty Metal indices rose around 2% each. While from 29 November till today BSE The metal climbed nearly 7%, while Nifty metals jumped over 6%.

BSE at around 9.59 am Metal Trading at 21,020.40 with a gain of 300.16 points or 1.45%. The index touched a high of 21,138.16 after opening at 20,831.15. Barring APL Apollo, all other metal stocks are up. On the other hand, the markets witnessed profit-booking with Sensex and Nifty 50 falling 0.5% each. India’s volatility index is up about 3%.

NALCO lead the rally with gains of around 4%, followed by Hindalco and Vedanta which rose over 2.6% and 2.15% respectively. Tata Steel, JSW Steel and SAIL shares gained nearly 2% each. There was also significant buying in JSPL and Coal India with gains of around one per cent each.

The dollar index lost its 105 support level and fell to its lowest level since June 28 as risk-on currencies gained momentum. The dollar has been under pressure following comments from US Federal Reserve Chairman Jerome Powell that signaled a less accommodative stance in upcoming policies.

On Monday, a Bloomberg report highlighted that the US dollar erased more than half of this year’s gains, fueled by rising demand from bets on the Federal Reserve’s aggressive rate hikes and China’s reopening. Will stop The Bloomberg Dollar Spot Index has trimmed this year’s gains to about 7% after earlier gaining 16%.

In its research note dated December 2, ICICI Securities disclosed that hot-rolled coil (HRC) prices declined by Rs 700-1,000/t in key markets of Mumbai and Ludhiana as traders were reluctant to import steel. Select the option. It added, “Our channel checks indicate that some traders have booked small quantities of HRC from Japan at USD 580-590/TE CFR, which implies a discount of 10% on the domestic price. Hence , we may see further correction in domestic steel prices.”

Besides, there is no respite on the exports front as demand has slowed down due to sluggish construction sector in Vietnam, the stock brokerage’s note said. As a result, bids for imported HRC are stuck at US$520-540/te. In addition, demand for CRC and HDG in Europe has also been weak.

Thus, ICICI Securities is of the view that exports are unlikely to pick up anytime soon. Low channel inventory resulting from production discipline by major domestic steel mills is the only bright spot. On the long front, capacity utilization in the DRI-IF segment is yet to pick up, resulting in secondary rebar prices rising by around Rs.1,800/te WoW. However, despite marginal increase in global iron ore prices, domestic pellet prices remained at Rs.

Notably, regional prices remained weak in the range of $500-550/te. Export prices to Japan/South Korea remain at $500/te – the lowest in the region. Export prices to China and Russia also declined by $5-8/te WoW. Surprisingly, the export price of India HRC at $545/tonne is the highest in the region.

However, ICICI Securities expects it to turn lower as competing offers from Russia and Turkey are at even lower prices. Coupled with the year end stocking up in Dec’22, the brokerage expects prices to remain bearish.

In this scenario, the brokerage’s note said, “Despite roll-back of export duty, we see little scope for exports from India to grow. In China, demand for real estate development, despite announcement of stimulus measures is expected to decline by 6-8mnte YoY. 315-317mnte in CY23 as per Mysteel estimates. The total area of ​​newly launched projects is expected to decline by 3%, while projects under construction may decrease by 4%.

On the forward outlook, the brokerage said weak global demand and prices may defeat the objective of export duty roll-back as exports may fail to take off.

Lastly, the brokerage said, “Our channel checks indicate that traders have already booked around 40,000 tonnes of imports from Japan for delivery on Jan 23. This could keep prices under pressure. We expect JSPL (TP : Rs.605) and Shyam Metaliks (TP: Rs.425) as our top picks due to their long-heavy product portfolio. We maintain APL Apollo (TP: Rs.1225) Also preferred as it is relatively safe from adverse price movements.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint.