Metals rally explained: Insights on Tata Steel and key metals & mining stocks

Indian metal stocks have outperformed the broader market over the past six months, with Nifty Metal rising 30 per cent compared with Nifty’s 13 per cent gain, driven by supportive policy measures and expectations of a spread expansion cycle. Analysts noted that while investor interest has increased following India’s extended steel safeguard duties and China’s anti-involution policy, further catalysts are expected. News reports of the EU’s potential steel import quota cuts and tariff increases are seen as bullish for European steel prices.

Tata Steel and JSW Steel are JPMorgan’s top picks in the metals and mining sector, while NMDC and Coal India are its least preferred stocks.

For the quarter gone by, steel companies are expected to report a decline in Ebitda per tonne, led by lower steel prices, partially offset by reductions in coking coal and iron ore costs. Nuvama expects Jindal Steel’s Ebitda to fall 35 per cent QoQ due to lower prices, volume, and higher cost of production, followed by SAIL (down 20 per cent QoQ) and JSW Steel (down 16 per cent QoQ). Tata Steel’s Ebitda, meanwhile, is likely to rise 15 per cent QoQ on the back of higher volumes, smaller declines in steel prices, and stable European earnings.

JPMorgan expects Tata Steel to benefit from rising automotive demand, upcoming capacity expansion at Neelachal, and India’s extended steel safeguard duties. Potential reductions in EU steel import quotas and tariff hikes could also boost European prices, supporting Tata Steel’s margins. The brokerage raised Tata Steel’s target price to Rs 195 from Rs 180.

JSW Steel, JPMorgan added, continues to demonstrate strong volume growth, with crude steel production up 16 per cent YoY versus the industry’s 12 per cent YoY. Supreme Court approval of JSW’s BPSL resolution plan removes an overhang, while ongoing capacity expansion supports further outperformance. JPMorgan has revised its target price for JSW Steel to Rs 1,250 from Rs 1,100.

Hindalco also showed resilience, supported by favorable FX, captive coal mines, and structural profitability improvements, despite near-term challenges at Novelis.

Conversely, Coal India faces weak international thermal coal prices and elevated inventories at power plants, while NMDC may experience pressure from lower international iron ore prices and rising domestic competition. JPMorgan maintains these as its least preferred stocks in the sector.