Steel Stocks Outlook: Seen down next week on political uncertainty

[K.Karthik Raja]

Steel Stocks Outlook: Seen down next week on political uncertainty
Saturday, Mar 8

Chennai - Steel shares are likely to decline further next week in
line with the broad market because of political uncertainty.
The prospects of a renewed tussle between the Left parties and the
ruling United Progressive Alliance will loom large on the stock
market . Left parties have reportedly issued fresh threats to the
Congress-led UPA government, warning it against signing the nuclear
treaty with U.S.
U.S. has given India time until July to negotiate with
International
Atomic Energy Association for finalising the nuclear safeguard pact.
Fear of political instability has suppressed the enthusiasm that a
quantum price hike in steel would have brought to the investors.
It is a good news... the price hike is a necessary cushion for
steelmakers against rising costs. But I believe investors will still
watch
out for the political story.
Steel companies were disappointed with the Budget as it "did
little to
check rising costs of raw materials and preserve iron ore for domestic
use. On top of that, we are being asked to hold prices," an industry
official said.
Steel companies raised prices by 1,500-3,000 rupees per 1 tn for
their products, much to the chagrin of the government.
The government's concern comes from the consistent rise in the
headline inflation rate, which climbed to 5.02% for the week to Feb
23, breaching the 5.00% level for the first time since the week to May
31.
This week, most frontline steel shares fell. The fall was led by
Jindal
Steel and Power and JSW Steel, two of the top gainers in recent
months.
Even the shares of companies like Steel Authority of India and
Tata
Steel--who have captive reserves of iron ore--declined considerably on
rising cost of other input materials such as coking coal and
limestone.
Wednesday, Tata Steel said its cost of raw materials other than
iron ore has gone up by 4,000 rupees per 1 tn in the last six months.
.
Week-on-week closing prices of key steel shares, in rupees, on
National Stock Exchange:
.
Company Closing Level Closing Level % Change
Mar 7 Feb 29
.
Steel Authority 232.35 254.45 - 8.7%
Tata Steel 773.55 801.75 - 3.5%
JSW Steel 940.20 1,059.60 -11.3%
Jindal Steel & Power 2006.50 2,304.90 -12.9%
.
Nifty 4771.60 5223.50 - 8.7%
Sensex 15975.52 17578.72 - 9.1%

K.Karthik Raja
www.kences1.blogspot.com