 "metals sector, lead, copper, aluminium, steel")
Shares of metal companies were in focus, gaining up to 4 per cent on the National Stock Exchange (NSE) in Wednesday’s intra-day trade in an otherwise subdued market on expectation of improved demand from China.
At 10:11 AM; Nifty Metal index, the top gainer among sectoral indices, was up 1.1 per cent, as compared to 0.17 per cent decline in the Nifty 50. Jindal Steel & Power (JSPL), Tata Steel, JSW Steel, Steel Authority of India, National Aluminium Company and Vedanta were up in the range of 1 per cent to 4 per cent.
Most of the base metal prices gained last week amid support from tightening inventories and a softer US dollar. Sentiment remained supportive in base metals on back of stronger-than-expected Chinese credit growth data, weaker US dollar, and bargain buying after recent correction in price.
Saumil Gandhi, Senior Analyst - Commodities, HDFC Securities expect base metals to rally further on back of expectation of improving demand from China. However, investors focus will be on Chinese first quarter GDP data release later on this week which could provide sign of a demand recovery, the brokerage firm said.
Among individual stocks, JSPL has surged 4 per cent to Rs 589.50 on the NSE. Thus far in the month of April, the stock has rallied 8 per cent, as against 1.6 per cent rise in the Nifty 50 and 5.7 per cent gain in the Nifty Metal index.
Going forward, strong domestic demand is expected to aid the growth in volumes, while JSPL is expected to experience healthy spreads on the back of various cost saving measures being undertaken. The same should enable JSPL to maintain a comfortable financial risk profile, notwithstanding the expansion project in the subsidiary, in line with the management’s stated stance to always keep the net debt to PBILDT below 1.5x and maintain liquidity of around Rs 3,000 crore, CARE Ratings said in its rationale.
The ratings also take into account JSPL bagging three new non-coking coal mines in Odisha and Chhattisgarh recently, after winning iron ore mines in Odisha last fiscal, which is expected to strengthen the company’s future raw material security, thereby reducing its dependence on the open market to procure iron ore and non-coking coal, the rating agency said.
JSPL has completed the divestment process of Jindal Power Limited (JPL) against a cash consideration of Rs 3,015 crore in Q1FY23, and resultantly, JPL has ceased to be a subsidiary or an associate entity of JSPL. The ratings also take cognisance of the repayment of the entire debt in the subsidiary companies, it added.
