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Sector recovery pushes up steel scrips

Mahua Venkatesh

Following the upswing in the steel industry, share prices of companies in the sector have firmed up in the last one-and-a-half months by between 2 and 57 per cent.

While the Tata Steel stock has gone up 20 per cent on the Bombay Stock Exchange, that of Essar Steel has risen 57.14 per cent. Similarly, the Jindal Power & Steel scrip jumped 23.7 per cent.

However, the Steel Authority of India stock saw a modest 2 per cent rise in the period. Industry experts feel that, since the sentiments are positive, the increase in stock prices would be by-and-large sustained under normal market conditions.

The rise in stock prices, according to the analysts, is due to the increase in rates of steel products in both the international and domestic markets.

"The hike in prices of various steel products has been reflected in the rise in the stock prices," said Anant Katare, research analyst, Khandwala Securities.

The price of hot-rolled coil in the world markets has gone up by 20 per cent from $200 per tonne to $240 per tonne. This has caused most HR coil producers to raise prices by up to Rs 1,000 per tonne.

Prices for most long products have already increased substantially. The price of rebars has gone up to Rs 15,220 per tonne this year as against Rs 15,108 last year. The price of wire rods is also estimated at Rs 15,220 as against Rs 14,925 last year.

This apart, analysts, tracking the sector, pointed out that the rise in the stock prices is mainly due to the positive market sentiments.

Most analysts feel the increase in stock prices is expected to be sustained. The prices may, in fact, go up further in the next few months. "Under normal situation, the prices will increase.

However, prices will be affected if the political scenario and cross-border tension in India mounts, Katare said.

The domestic steel industry is hoping that demand will go up in the by 7-8 per cent during this financial year, while last year it rose 5 per cent.

Demand in the sector will be primarily driven by the growth in the infrastructure sector. At the same time, most companies are going in for re-stocking of inventories.

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