Metal stocks have a mixed day after export duty withdrawal – Jindal Stainless, Apollo Tubes, SAIL stocks rise; Tata Steel, JSW Steel drag

• Shares of Jindal Stainless, Apollo Tubes and SAIL witnessed a rise on Monday reacting to the withdrawal of export duty on steel products and iron ore.
• However, other prominent metal stocks like Tata Steel, JSW Steel and Hindalco failed to shine, dragging the Nifty Metal index down 0.9% on Monday.
• Analysts say that while this is a positive move, the upside potential is limited in the short-term as exports remain unattractive.

Shares of Jindal Stainless, Apollo Tubes and SAIL witnessed a rise on Monday reacting to the withdrawal of export duty on steel products and iron ore.

Jindal Stainless was the top gainer, with its shares rising by 9.2% during the day’s trade to ₹182. NMDC and SAIL posted relatively moderate gains, with their shares gaining between 1.2-3.5% during the day.

However, despite the gains made by some metal stocks, the Nifty Metal index was down 0.8%. Major players like Tata Steel, JSW Steel, and Hindalco registered declines in the range of 0.8-1.9%.

Overall, the primary benchmark indices Nifty50 and Sensex opened in the red due to fresh outbreaks of Covid-19 in China and the US Fed outlook due later this week.

Export duty withdrawal a positive step, but near-term challenges limit upside

Analysts at Nomura believe the withdrawal of export duty will not significantly push up the export prices as demand is already low in the global markets and the export prices are largely in line with global peers.

“We note that the imposition of export duty since May significantly impacted steel exports from India. Exports fell from average ~0.78 million tonnes in April and May 2022 to ~0.36 million tonnes in October 2022 — down 66% y-y and lowest monthly level of exports since May 2016,” said a report by Nomura Research.

The research firm says that in the near-term, this will help in preventing an inventory build-up, but the upside remains limited.

“With the removal of export duty, we expect export volumes to recover thereby preventing oversupply and providing some downside protection to steel prices,” the report added.

According to analysts at Phillip Capital, the export duty withdrawal offers no benefits in the short-term, but is a positive move in the medium to long term.

“The move is positive for the entire ferrous pack in a medium to longer run perspective but offers no near-term benefits at this point of time,” said the Phillip Capital report, adding that the domestic prices won’t see any major difference since exports are still not lucrative enough.


Source: NSE, as of 3:30 pm, November 21, 2022

Nifty Metal has surged 11.6% in the last one month.

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