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Lokeshwarri S. K.

The famous stock market saying, price discounts all, is truly reflected in the movement of the Tata Steel stock prices over the last six months. In the six months from the beginning of July 2006 to the end of January 2007, The stock lost 13 per cent. This is a steep underperformance when viewed in relation to the 32 per cent rise in the Sensex in the same period. Its peer, Steel Authority of India managed a 32 per cent gain in this period.

The response of the stock markets to the Tata Steel's takeover of Corus has been unenthusiastic from the outset. The nascent recovery that began in the stock price from June lows was brought to an abrupt end in October at the price of Rs 547, when Tata Steel expressed its interest in Corus. The stock price has not crossed this level since then.

The volumes on the Tata Steel stock too reflect the poor light in which the stock markets viewed this entire process. The flurry of activity that is associated with the stock has been missing over the last three months. The daily traded volume has been below 10 lakh shares between January 1 and January 22, 2007, in the run-up to the auction.

Technical view

The technical chart of Tata Steel has been under pressure since October 2006. But the long-term outlook for this stock is positive. long-term outlook will be altered only if the stock price falls below Rs 300. The chart has completed a 5-wave impulse formation from the low Rs 87 made in May 2003 to the peak formed in June 2006. The movement since June 2006 has been a correction of this long-term up-move. The correction halted at Rs 376 in June 2006, which is a 50 per cent retraction of the previous up-move.

The stock price movement post-June 2006 seems like a consolidation at lower levels before the resumption of the long term up-trend that can take the stock to a new high. But the sideways move between Rs 400 and Rs 550 can extend for a few more months.

Long-term investors can look out for buying opportunity every time the stock price nears the lower boundary.

More Stories on : Steel | Technical Analysis | Mergers & Acquisitions | Tata Steel Ltd

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