Shares of metal manufacturers Tata Steel Ltd and Vedanta Ltd among others are in focus as economic data in China is showing signs of recovery. Manufacturing PMI in the neighbouring country has risen to a 11-year-high and property prices have started to stabilise. This has led to a spike of 14% in China export steel price in CYTD 2023 post a 23% decline in CY22, said brokerage Jefferies in its ‘Metals and Mining’ report.
Indian metal stocks have underperformed most global peers CYTD, and we see this as a buying opportunity, added Jefferies.
Shares of Tata Steel and Vedanta, which are among the market leaders in the metal sector, have plunged 17% and 25%, respectively during the last one year. On a year-to-date basis, Vedanta shares have declined 8.63 per cent and Tata Steel stock has plunged 4.17 per cent.
Tata Steel stock has been falling for the last two sessions and has remained highly volatile in the last six months. The Tata Group stock, which ended at Rs 107.75 on September 13, 2022, was trading at Rs 107.95 in the afternoon trade today. On January 19, 2023, the stock closed at a six-month high of Rs 123.5 on BSE. Since then, it has majorly traded in the downward trajectory.
In the current session, Tata Steel stock declined to an intraday low of Rs 107.45 against the previous close of Rs 108.05 on BSE. The Tata Group stock has been falling for the last two sessions. Total 8.54 lakh shares of the firm changed hands amounting to a turnover of Rs 9.23 crore. The stock hit a 52-week high of Rs 138.63 on April 6, 2022 and a 52-week low of Rs 82.71 on June 23, 2022.
In terms of technicals, the relative strength index (RSI) of Tata Steel stands at 44.5, signaling it’s neither trading in the overbought nor in the oversold territory. The stock has a beta of 1.3, indicating very high volatility in a year. Shares of Tata Steel are trading higher than the 5 day and 200 day moving averages but lower than 20 day, 50 day and 100 day moving averages.
On the other hand, shares of Vedanta rose 2.66% intraday to Rs 287.3 against the previous close of Rs 279.85 in the afternoon session today. Total 2.45 lakh shares of the firm changed hands amounting to a turnover of Rs 6.94 crore. The stock hit a 52-week high of Rs 440.75 on April 11, 2022 and a 52-week low of Rs 206.10 on July 1, 2022.
In terms of technicals, the relative strength index (RSI) of Vedanta stands at 36.8, signaling it’s neither trading in the overbought nor in the oversold territory. The stock has a beta of 1.5, indicating very high volatility in a year. Shares of Vedanta are trading lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
With Tata Steel and Vedanta stocks witnessing correction recently, here’s a look at what analysts said about the outlook of these stocks.
Vaishali Parekh, Vice President – Technical Research at Prabhudas Lilladher said, “Among Vedanta and Tata Steel, I personally would suggest to go for Tata Steel at the current market price of Rs 108 as technically it is better placed than Vedanta. Tata Steel after the correction witnessed has come near the significant 200DMA level of Rs 105 and witnessed a consolidation at that zone to suggest bottoming out for the stock and with a pullback visible is anticipated to carry on with the positive move still further ahead. The RSI has indicated a trend reversal from the oversold zone and is well placed at current price rate. We expect the stock to move ahead for initial target of Rs 115 and thereafter Rs 124-127 zone if it breaches Rs 115 zone decisively.”
Abhijeet from Tips2trade said, “A rising interest rate scenario with a deteriorating economy has led to a slump even in commodity stocks like Tata Steel & Vedanta. Tata Steel looks a better bet as fundamentally, numbers are much better with strong support at Rs 101. A daily close above Rs 125 should trigger a strong uptrend till Rs 165 over a longer term period. Vedanta has been a good company but a very high promoter pledge with higher debt in today’s scenario makes it a difficult bet to scale higher in terms of stock price returns.”
Meanwhile, Jefferies has assigned a Buy call on Tata Steel with a target price of Rs 145 apiece.
“For Tata in particular, the European business (TSE) contributes just Rs 11 per share of EV to our price target of Rs 145. We see the recent underperformance as a buying opportunity in Indian metals; our top pick is Tata, followed by Hindalco,” the brokerage said.
Emkay Global had assigned a target price of Rs 540 to Vedanta in January-end this year. The brokerage expects Vedanta to generate disposable free cash flow of Rs 1,140 billion over FY23-25. “On 12M-forward EBITDA (largely based on spot spreads), the stock is trading at EV/EBITDA of 4.2x, implying that even if metals prices were to suddenly correct to normalized levels, there is limited downside to the share price,” it said.
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