The Hindu Business Line : Profit booking, supply worries impact key steel scrips

Mumbai, March 13 Most of the metal stocks suffered huge losses on Thursday as the equity market suffered a sharp fall. According to analysts, the losses range from 8 to 11 per cent in key metal scrips.

High raw material costs and supply worries too have affected the metal sector, analysts said.

The BSE Metal index corrected by 8.38 per cent, far more than the 4.78 per cent loss for Sensex.

Worst hit

Among the worst hit metal stocks were SAIL (11 per cent), Tata Steel (9.04 per cent), Jindal Steel (9.97 per cent), Hindalco (9.44 per cent), Sesa Goa (9.71 per cent), and Sterlite Industries (7.07 per cent).

“It’s just a sentimental reaction to the global meltdown; there is no major change in the fundamentals,” said Mr Ashish Poddar, Metal Analyst, Almondz Global Securities.

“For the last one and a half years, the metal stocks have outperformed the markets and what we are seeing is profit booking.”

“Though there are concerns on margins of some companies falling, they won’t fall drastically,” Mr Poddar said, adding: “Quite a few companies are facing challenges in the import of raw material on account of congestion at some Australian and other international ports.”

Market line

Another metal analyst who didn’t wish to be quoted said that the metal stock had fallen in line with the overall market. But the fall in Tata Steel was also partly due to their consolidated numbers that were below the market expectations.

“Also, the coking coal prices having hit the roof, and the margins of steel companies are likely to come under pressure. While Corus mostly depend on imported coking coal, Tata Steel dependency is only up to 40 per cent, while SAIL’s dependence on imported coal is up to 60 per cent,” the analyst said.

All stocks in the metal index suffered losses. Losses were relatively moderate for some companies such as Hindustan Zinc, which lost 1.16 per cent, Gujarat NRE Coke (2.15 per cent), Bhushan Steel (4.72 per cent), and NALCO (5.27 per cent).

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