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Steel stocks hog limelight

June 26, 2006 13:39 IST
The much-awaited result of one of the most significant consolidations in the steel industry was out on Sunday.

Sentiments were high as the Mittal-Arcelor deal became a reality. With the Mittal-Arcelor deal sealed, steel stocks are back in the limelight. Here's a reality check on how they are faring today.

The BSE Metal index has not reaped any major gains. It is in fact slightly in the negative terrain.

PN Vijay, Investment advisor : Steel stocks remain good bets for the next three months.  This global development is positive because capacity is getting agglomerated which is always good for the industry and for producers because they can negotiate better with consumers. There is of course sentimental joy in India because an Indian has done it. It is good for the Indian steel industry too.

Already in the last three months from middle of March, steel prices have regained momentum, which they lost substantially between December and March. So these stocks got beaten down a lot, but they remain good bets for the next three months.

Tisco may bounce back because it has valuations on its side. This sector is one of the cheapest right now right in terms of simple PE multipliers. So value investors would keep buying but a lot would depend on how the steel outlook is for 2007. But the rest 2006 looks good.

Kashyap Pujara of Sushil Finance: I am very optimistic on the prospects of Tata Steel. Overall, the steel space still has a lot of value. Even if one looks at Tata Steel on a standalone basis, one is looking at Tata Steel practically reporting a Rs 75 EPS in FY07.

The margin pressure is also stabilising because of the new contract on the coking coal front. We can expect a Rs 600 plus price target on Tata Steel.  Dips will definitely be a good buying opportunity for a 6-12 months horizon. So I am very optimistic on the prospects of Tata Steel.

Salil Sharma, Technical analyst : Sail needs to close above Rs 83 on very good volumes to sustain the upmove.  Sail has been looking good. It has seen a good run-up. It has resistance in the Rs 81-82 range where it is trading at the moment. It needs to close above Rs 83 on very good volumes for it to sustain the move up. With the Arcelor-Mittal news out, there could be some kind of selling. So we need to see the closing today very carefully.

Ashwani Gujral, Technical analyst:  Tisco has crossed a key resistance around Rs 520-525 level and it should test Rs 570 in this sort of a run. For Sail, the next resistance is around Rs 86.50 and then probably it should see levels of close to Rs 90.

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Sakshi Sharma, Moneycontrol.com