The worst fears are coming true for India’s steel industry and investors in the segment. Having kept retail prices unchanged for nearly four months, steel companies now face pressure to cut prices as signs of slowing demand emerge.
Shares of steel companies are likely to fall further next week as concerns over softening prices, high costs and waning demand from key customer industries such as auto and construction may force investors to sell off, some analysts said.
This week, the decline in steel shares was led by JSW Steel as the company’s stock shed 7 per cent of its value. Industry leaders Steel Authority of India and Tata Steel followed with declines of 6.4 per cent and 6.7 per cent, respectively.
“There is tremendous pressure on steel shares. With economic growth slowing, the steel industry is seen being directly impacted,” an analyst of a foreign brokerage said. The government has been insisting that Indian companies should bring down their prices in line with the recent fall in global prices on account of a slumping demand in Europe and the US.
Banks look up: Bank stocks are likely to rise next week riding on the positive sentiment because of a fall in global crude oil prices.
Besides, expectations of a further opening of the insurance sector to foreign direct investment (FDI) could add to the run-up in bank stocks, analysts said. “The banking and financial sector is gaining momentum due to positive factors like crude oil (fall in prices) and FDI-related expectation in the insurance sector. There is support at every dip,” said Sandeep Shah, head of equity sales, Tower Capital.
The Group of Ministers has already cleared FDI in the insurance sector to up to 49 per cent from 26 per cent at present, and now the proposal will be placed before the Union Cabinet for its approval.