Sell Tata Steel, SAIL shares; add Jindal Steel, JSW Steel and NMDC: Kotak

Kotak Institutional Equities in a note on metals & mining sector advised investors to 'Sell' shares of SAIL and Tata Steel Ltd, citing  weak growth visibility and rich valuations. The domestic brokerage suggested 'Add' on Jindal Steel Ltd and  JSW Steel Ltd, citing better risk-reward in non-integrated steel producers. Kotak said there is a seasonal blip in steel prices and a further downside looks limited. Jindal Steel and JSW Steel are its top picks.

Kotak said the recent dichotomy in long and flat steel prices is transitory. Domestic rebar prices have corrected 11 per cent from recent peaks, while HRC prices have been largely unmoved with a mere 2-3 per cent decline in the same period. 

"We expect the sharp sequential hike in Q4FY26 trade prices to be fully reflected from Q1FY27, and view this correction as seasonal. The downside remains limited as domestic HRC prices are at a 7 per cent discount to China import parity levels," Kotak said.

The brokerage has a target of Rs 1,400 on Jindal Steel and Rs 1,425 on JSW Steel, suggesting double digit upsides. Its target for SAIL at 140 suggests over 20 per cent downside. Kotak's Tata Steel's target of Rs 180 hints at single-digit downside. NMDC is a 'Add' with a target of Rs 100.  

Data showed spot primary rebar prices have corrected Rs 7,000 per ton or 11 per cent from the April 2026 peak. Over the same period, domestic HRC prices have corrected a mere Rs 1,600 per ton or 2-3 per cent, due to seasonal weakness in the ferrous sector.

"Rebar/HRC prices are flat/9 per cent QoQ in 1QFY27. HRC prices continue to be at a 7 per cent discount to China import parity prices suggesting limited downside despite adverse seasonality. Weak steel spreads in China due to cost inflation improve odds of higher regional prices going ahead," Kotak said.

The brokerage expects margins for steel makers to improve sequentially, as a portion of the sharp 14 per cent and 21 per cent increase in trade prices in 4QFY26 gets reflected in the June quarter. 

"This should more than offset the increase in coal and ore prices, leading to higher qoq margins for our ferrous coverage," Kotak said.