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Tisco steels up after recent battering
March 11, 2003 13:06 IST
Tisco staged a recovery on Tuesday on talk that the open position of the stock in the F&O segment has dropped.
The scrip of India's largest private sector steel manufacturer climbed by 1% to Rs 136.45 on BSE by 10:40 IST. It recovered from its early low of Rs 133.90 by then. Over 350,000 Tisco shares were traded on BSE so far. In the 13 sessions between 19 February and 10 March 2003, the Tisco scrip shed 14.6% to Rs 135.10 from Rs 158.15.
Buying in Tisco has manifested on talk that the open position of the stock has been lowered in the derivatives market. However, dealers feel the actual recovery may be due to a technical rebound in the market though the undertone is still negative. The market, therefore, is not expected to hold on to the higher levels. Dealers, in any case, say the open interest position in Tisco is still huge at 1.19 crore shares in March 2003. But it has dropped from the 1.30 crore shares in January 2003.
Earlier, players who had built huge ‘buy' positions in the derivatives segment in February 2003 did not get an opportunity to square off their positions completely by 27 February 2003. Therefore, they carried forward their positions to March 2003. But with the market proving to be lacklustre after the Union Budget 2003-04, players have begun to offload positions. As per market buzz, Birla Sun Life was an active seller on the Tisco counter in recent sessions. Evenso, Tisco is deemed as a a good pick at the current levels following the company's strong fundamentals and expectations of good future growth.
The government's major thrust on infrastructure development in the Union Budget for 2003-04 should hold the company in good stead. As per the Budget, the initial government funding for new infrastructure projects will total Rs 2,000 crore (Rs 20 billion) for the year. Principally, investments will be made in railways, airports and sea ports through an innovative funding mechanism. The Railway Budget has also proved benficial to Tisco, with the cut in freight rates for steel. Freight costs account for nearly 11% of the total cost of production of steel companies, and nearly 50% of their output is transported by rail. Steel companies are expected to save nearly 2.8% in freight costs and 0.32% of the total cost of production.
There will also be savings in freight on scrap and iron ore as well, but savings will differ from company to company depending on the raw material mix and the distance from mines. The Indian steel sector has witnessed a turnaround over the past year following sustained demand for steel (in both domestic and international markets) coupled with a huge hike in steel prices over the last year. Last month, steel majors effected a hike in flat steel prices by Rs 1,000-1,400 per tonne, the second major price hike in 2003.
Further, there are talks that the steel makers are going to hike steel prices in the coming months following huge demand from foreign markets as well as domestic markets.
For the third quarter ended 31 December 2002, Tisco posted an impressive net profit of Rs 280.23 crore (Rs 2.8 billion) as against Rs 34.54 crore in the corresponding period of the previous year. Net sales rose by 27% to Rs 2,152.69 crore (Rs 21.5 billion) from Rs 1,694.63 crore (Rs 16.94 billion) in DQ 2001.
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