Mittal deal, price hike to drive steel stocks

Frontline steel sector shares are seen up this week in anticipation of a hike in steel product prices and the merger deal between Mittal Steel and Arcelor, according to analysts.

"The outlook on steel stocks is very bullish...they should go up," said Sanjay Jain, a broker.

Analysts expect local steel majors to hike commodity prices by around Rs 1,000 owing to rising prices of the metal in overseas markets.

Steel producers revise hot rolled prices on a monthly basis and galvanised product prices on fortnightly basis.

However, this time around producers are likely to set local prices by following export parity prices rather than import parity prices because most private producers are exporting in large quantities, analysts said.

Also attractive valuations are likely to drive investor interest in steel stocks, which had recently taken a beating following the stock market crash.

"Valuations (steel stocks) are extremely attractive at this stage," Jain said.

Last week steel stocks made major gains towards the end of the week on news of developments in Arcelor-Mittal Steel saga.