Steel Stocks Outlook: Down next week on high inflation
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N.Sukumar
Jun 21, 2008, 1:40:22 AM6/21/08
to Kences1
NEW DELHI - Double-digit inflation today triggered a sell-off in the
stock markets, pulling down the benchmark Sensex by 517 points, or
3.4%.
The gloom in the market is likely to persist, and most of the
investors'
brunt will be borne by stocks that are directly linked to the economy,
such as steel.
"It's shocking. It's a big blow to the growth story of India," an
economist working with a major steelmaker in the country said,
reacting to the 13-year high inflation rate of 11.05% for the week to
Jun 7.
The growth of the steel industry is directly proportional to the gross
domestic product of a country, and high inflation is threatening to
impact growth.
"These is a difficult time, and I hope people will understand the
difficulties that we face," Finance Minister P. Chidambaram said,
pointing to the helplessness of the government.
This week, major steelmakers, with the exception of JSW Steel Ltd.,
lost weight, as investors had no sight of inflation coming down.
The worst fears of the industry have already started coming true, with
HDFC Bank increasing the prime lending rate by 25 basis points to
15.25%.
JSW Steel shares managed to brave the sentiments in the market, after
it said it will form a joint venture company in Georgia to make steel
rebars.
The company will have 49% stake in the Georgia rebar unit. It also
plans to add 3 mln tn new capacity by September, Chief Financial
Officer Seshagiri Rao said early this week.
"Next week, we expect most steel shares to plummet. The market is
completely spooked by inflation, which looks like rising further.
Consistent price increases by Corus have so far failed to insulate its
parent Tata Steel Ltd. from the inflationary impact.
Time to come, Tata Steel will be much better
positioned to tackle the adverse situation.
Week-on-week closing prices of key steel companies' shares, in rupees,
on National Stock Exchange:
Company Closing Level Closing Level % Change
Jun 20 Jun 13
Steel Authority 154.15 159.20 - 3.2%
Tata Steel 777.40 841.00 - 7.6%
JSW Steel 994.00 947.55 4.9%
Jindal Steel & Power 2,011.75 2,094.65 - 3.9%
Nifty 4347.55 4517.10 - 3.7%
Sensex 14571.29 15189.62 - 4.1%
N.Sukumar
Research Analyst
stock markets, pulling down the benchmark Sensex by 517 points, or
3.4%.
The gloom in the market is likely to persist, and most of the
investors'
brunt will be borne by stocks that are directly linked to the economy,
such as steel.
"It's shocking. It's a big blow to the growth story of India," an
economist working with a major steelmaker in the country said,
reacting to the 13-year high inflation rate of 11.05% for the week to
Jun 7.
The growth of the steel industry is directly proportional to the gross
domestic product of a country, and high inflation is threatening to
impact growth.
"These is a difficult time, and I hope people will understand the
difficulties that we face," Finance Minister P. Chidambaram said,
pointing to the helplessness of the government.
This week, major steelmakers, with the exception of JSW Steel Ltd.,
lost weight, as investors had no sight of inflation coming down.
The worst fears of the industry have already started coming true, with
HDFC Bank increasing the prime lending rate by 25 basis points to
15.25%.
JSW Steel shares managed to brave the sentiments in the market, after
it said it will form a joint venture company in Georgia to make steel
rebars.
The company will have 49% stake in the Georgia rebar unit. It also
plans to add 3 mln tn new capacity by September, Chief Financial
Officer Seshagiri Rao said early this week.
"Next week, we expect most steel shares to plummet. The market is
completely spooked by inflation, which looks like rising further.
Consistent price increases by Corus have so far failed to insulate its
parent Tata Steel Ltd. from the inflationary impact.
Time to come, Tata Steel will be much better
positioned to tackle the adverse situation.
Week-on-week closing prices of key steel companies' shares, in rupees,
on National Stock Exchange:
Company Closing Level Closing Level % Change
Jun 20 Jun 13
Steel Authority 154.15 159.20 - 3.2%
Tata Steel 777.40 841.00 - 7.6%
JSW Steel 994.00 947.55 4.9%
Jindal Steel & Power 2,011.75 2,094.65 - 3.9%
Nifty 4347.55 4517.10 - 3.7%
Sensex 14571.29 15189.62 - 4.1%
N.Sukumar
Research Analyst
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Jun 21, 2008, 1:00:01 PM6/21/08
to Kences1
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