The Hindu Business Line : M&A activity, corporate actions keep steel stocks active

Kolkata June 4 Steel stocks seem to be moving in a range with an upward bias. Market analysts feel that specific corporate developments rather than commodity cycle have more to do with the current consolidation stage ahead of the lean months marked by rain-induced slowdown in consumption.

Steel counters today made a valiant effort to break the flattish movement in the intra-day trading, but closed near their previous levels. Tata Steel, SAIL and Ispat finished marginally in the green, JSW closed in the red, albeit slightly.

Tata Steel has improved by over 15 per cent in the last one month because of its continuing acquisition and expansion spree. SAIL's market valuation also increased in the past one month, but not to the extent of Tata Steel. It improved around 4 per cent on the basis of earning growth potential in the medium to long-term perspective. The price movement in stocks like JSW and Ispat, however, remained more or less flat.

According to Mr Ajay Jaiswal of Angel Broking, specific M&A activity or corporate actions have lent their weight to the improvement in valuations. "For instance, Tata Steel, which was hammered down after the Corus acquisition, has recovered much of its lost ground. The appreciation of the rupee in the past few months has actually brought down the cost of acquisition by around 8 per cent", he said.

However, analysts feel that the power of hiking prices with the steel companies will remain limited in the next 3 months not only owing to the relative inaction in the construction sector but also on account of a strong resistance against its effect on inflation, as expressed by the authorities.

Some market players feel SAIL is likely to be driven by the expectation that it may explore to extract some valuation from its vast land bank, spread across several urban centre.