The S&P BSE Metal Index, which had been a laggard in January-February period, is catching up with other sectoral indices since the upside momentum in high-beta stocks picked up.
Global metals prices are influenced by China and the slowdown in Chinese market has been weighing on the prices. China HSBC PMI has deteriorated for the third consecutive month and fell an eight-month low of 48.0 in March from 48.5 in February. The index has been below the 50 level since January, indicating a contraction this year.
"The latest theme in the market is that of China's economy slowing down, which should have weighed on the industrials. However, the weakness in the Chinese economy is giving rise to the speculation of further stimulus in China. This is keeping the industrial commodities afloat," said Sharekhan report.
Despite the slowdown concerns, iron ore and steel prices are firming up and that is also giving some respite to metal counters.
Citigroup in its recent report on Indian metal companies believe the sector offers value/yield. According to the report, the companies are addressing the wrongs of the past and valuations are yet to capture the change in tack.
"We believe the appetite for capex has diminished for the sector. Leveraged companies are focused on deleveraging. Companies have stalled projects, limited new announcements (unless it's for self-help) with the view to focusing on balance sheets. Most of our leveraged companies are likely to become FCF-positive over the next few years," the report said.
The brokerage has upgraded HindalcoBSE 3.01 % from Sell to Buy, SesaBSE 2.25 % from Neutral to Buy and resumed on JSW SteelBSE 2.63 % with a Neutral rating. It has a Buy on Tata SteelBSE 1.69 %, Hindustan ZincBSE 1.54 % and Coal IndiaBSE -0.78 %.
According to Rahul Shah, Associate Vice President, Group Leader-Equity Advisory Group, Motilal Oswal Financial ServicesBSE 7.35 %, there is still some steam left in the sector.
"I feel that in metals you would see some more buying renewed. A fresh long should definitely be Hindalco and Sesa Sterlite," he said to ET Now.
However, others are advising caution as the metal sector looks risky due to uncertainty in China and hence only trading bets should be initiated.
"Fundamentally not much has changed. On the contrary, fears of China are absolutely real and they could certainly impact the metal prices. I am not sure that this is a good long term or medium term trade. These are good trading stocks and valuations certainly support the stock prices to go a slightly higher," said Dipan Mehta, Member BSE and NSE to ET Now.
At 11:30 a.m.; the BSE Metal Index was down 0.71 per cent on the BSE. It touched a high of 10,024.36 and a low of 10,180.14
This article taken from Economic Times : http://economictimes.indiatimes.com...s-citi-upgrades-pack/articleshow/33121931.cms
Global metals prices are influenced by China and the slowdown in Chinese market has been weighing on the prices. China HSBC PMI has deteriorated for the third consecutive month and fell an eight-month low of 48.0 in March from 48.5 in February. The index has been below the 50 level since January, indicating a contraction this year.
"The latest theme in the market is that of China's economy slowing down, which should have weighed on the industrials. However, the weakness in the Chinese economy is giving rise to the speculation of further stimulus in China. This is keeping the industrial commodities afloat," said Sharekhan report.
Despite the slowdown concerns, iron ore and steel prices are firming up and that is also giving some respite to metal counters.
Citigroup in its recent report on Indian metal companies believe the sector offers value/yield. According to the report, the companies are addressing the wrongs of the past and valuations are yet to capture the change in tack.
"We believe the appetite for capex has diminished for the sector. Leveraged companies are focused on deleveraging. Companies have stalled projects, limited new announcements (unless it's for self-help) with the view to focusing on balance sheets. Most of our leveraged companies are likely to become FCF-positive over the next few years," the report said.
The brokerage has upgraded HindalcoBSE 3.01 % from Sell to Buy, SesaBSE 2.25 % from Neutral to Buy and resumed on JSW SteelBSE 2.63 % with a Neutral rating. It has a Buy on Tata SteelBSE 1.69 %, Hindustan ZincBSE 1.54 % and Coal IndiaBSE -0.78 %.
According to Rahul Shah, Associate Vice President, Group Leader-Equity Advisory Group, Motilal Oswal Financial ServicesBSE 7.35 %, there is still some steam left in the sector.
"I feel that in metals you would see some more buying renewed. A fresh long should definitely be Hindalco and Sesa Sterlite," he said to ET Now.
However, others are advising caution as the metal sector looks risky due to uncertainty in China and hence only trading bets should be initiated.
"Fundamentally not much has changed. On the contrary, fears of China are absolutely real and they could certainly impact the metal prices. I am not sure that this is a good long term or medium term trade. These are good trading stocks and valuations certainly support the stock prices to go a slightly higher," said Dipan Mehta, Member BSE and NSE to ET Now.
At 11:30 a.m.; the BSE Metal Index was down 0.71 per cent on the BSE. It touched a high of 10,024.36 and a low of 10,180.14
This article taken from Economic Times : http://economictimes.indiatimes.com...s-citi-upgrades-pack/articleshow/33121931.cms
