Shares of Tata Steel were trading below the Rs 100 mark for the fourth straight session today. The steel stock has corrected recently amid the ongoing volatility as fears of a recession roiled domestic market in the last six sessions. Tata Steel stock, which closed at Rs 104.25 on September 23 fell to Rs 95.25 on September 28, losing 8.6 per cent during the period.The Tata Group stock gave up the Rs 100 level, closing at Rs 99.85 in the very next session. The leading steel player has been facing headwinds for long now.
The recent correction due to weak global cues has spurred selling in the stock. An economic recession for the global economy recovering from the coronavirus blues will lead to a fall in construction and allied activities, hitting demand for inputs such as steel among other components.
Metal stocks such as Tata Steel have for long been under pressure as the ongoing Russia-Ukraine war and uncertain demand outlook from China dampened investor sentiment. Steel sector in China is facing challenges from weaker-than-expected demand from the real estate sector. Covid-19 pandemic-related restrictions also continue to disrupt construction activity.
On September 22, the board of Tata Steel cleared the amalgamation of its seven subsidiaries with itself. Tata Steel Long Products, Tata Metaliks, The Tinplate Company of India, TRF, Indian Steel & Wire Products, Tata Steel Mining and S&T Mining are the firms, which will be merged with the parent company. The development, though, positive failed to enthuse the stock.
The stock rose 1.73 per cent today to Rs 96.90 as domestic market recovered after six sessions in line with positive global cues. Tata Steel share price rose after falling for three straight sessions. Shares of Tata Steel are trading lower than 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
The large cap stock has lost 25 per cent in a year and fallen 13 per cent in 2022. Shares of Tata Steel have declined 33.28 per cent from their 52-week high of Rs 142.62 hit on October 19, 2021.
The Tata Group firm reported a 21 per cent fall in its consolidated net profit in the first quarter of the current financial year. The steel major logged a consolidated net profit of Rs 7,714 crore for the quarter ended June 30, 2022 against Rs 9,768 crore in the corresponding quarter of FY22.
Here's a look at what market experts said about the ongoing weakness and how to approach the Tata Group stock.
Punit Patni, Equity Research Analyst, Swastika Investmart said, "Tata Steel stock is witnessing pressure due to the cooling off of steel prices, subdued global demand because of the rate hike regime by the global central banks, and export duty imposed by the government of India, which will create a supply glut in the domestic markets. Nevertheless, long-term investors with moderate to high-risk appetites can accumulate the stock on dips due to the sanguine long-term demand outlook, competitive advantages of Indian steel makers like low labour and iron ore cost, and the curtailment of steel production by China. Additionally, Europe energy crisis can prove to be a boon for Indian steel manufacturers provided the government removes the export duty."
Abhijeet from Tips2trade said, "A global meltdown especially in US and Europe has triggered a panic sell off in global indices with metal stocks including Tata Steel bearing the brunt. Rs 94 will be an immediate support with very strong support at Rs 90.5. Till Tata Steel doesn't close above Rs 101 on daily charts, investors should avoid buying."
Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking said, "The volume trend has shown an accumulation in Tata Steel for the past few months, thus indicating an increased enthusiasm to push prices higher while the latter lacks volume participation. Hence, it can be expected Tata Steel to witness a strong upmove and head towards Rs 140- Rs 150 in medium to long-term perspective (measuring implication of the bullish downward sloping channel)."
Ravi Singh, vice president and head of research, Share India said, "The weakness in international prices and subdued demand have driven down the domestic steel prices. Tata Steel is on an expansion mode and requires large capital. The cost of financing may also get adversely affected by the rising interest rate. The current volatility in rupee is also working against the import dependence and offshore business of the company. However, Tata Steel’s strong cash flow on the back of robust operating performance is posting confidence on its future perspective. The stock may witness lower levels buying for the target of Rs 100 in the short term and Rs 107 levels for the long term."
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today