The Hindu Business Line : Steel stocks drag BSE Metal Index down

Mumbai, July 17 The BSE Metal Index ended the day in red, dragged down by some of the steel stocks, which fell on reports that the Government might regulate steel prices. While the Sensex was up 536 points or 4.26 per cent on Thursday, the Metal Index was down 2 per cent. The steel stocks that slid were down between 3-6 per cent.

There have been reports that the Government might put in place a price band for steel products, which will prevent the steel companies from hiking the prices of their products, beyond a stipulated ceiling, in order to try to control inflation. Following this, there are now concerns regarding the companies’ profits and margins, said analysts.

Price hikes

There are also reports that the Government might even ask the companies to hold their prices for another two months. (Steel companies had earlier committed to abstain from price hikes for three months).

“Asking the companies not to increase their steel prices for another two months would further hit their margins. This is because inflation is on the rise. Even during the previous quarter, the margins of these companies were affected,” said Mr Pawan Burde, metals, mining and cement analyst at Angel Broking.

Tata Steel was among the two worst-performing stocks of the day in the Sensex. The frontline scrip opened at Rs 660, also the day’s high, and touched a low of Rs 596.65, before closing the day at Rs 607.4, down 2.95 per cent, from its previous close.

SAIL closed at Rs 119.85, which is a 5.5 per cent dip from its previous close. The scrip touched an intra-day low of Rs 117.55; this is the lowest the scrip has fallen to in the last 52 weeks.

Negative reaction

Jindal Steel was down on Thursday by 3 per cent. However, stocks such as Bhushan Steel, JSW Steel and Bajaj Steel Industries moved up. JSW was up 3.84 per cent, Bhushan Steel gained 1.74 per cent and Bajaj Steel went up by 1.56 per cent.

Analysts say that if the Government were to hold a hike in prices or even put a price band, companies such as Tata Steel should benefit from this as they have their own raw material.

“Tata Steel would be insulated from this to a certain extent. So it is strange that the market took such reports negatively, even in the case of Tata Steel. Whereas, companies such as Bhushan Steel, which does not have their own raw material, would have to cope with cost increase,” said the head of research at a stock broking firm.

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