Stocks of major steel companies are seen rangebound next week, in the absence of fresh sector- and market-specific triggers. In terms of new reforms, the government has already done what it had to. Now the question is what next. There seems to be no positive or negative news coming from the government. Because of this, the overall mood in the market may cool down in coming sessions. The government Thursday announced more reforms and cleared amendments to a series of pending bills, including those related to pension and insurance. The Union Cabinet approved raising the foreign direct investment limit in the insurance sector to 49% from 26%. It also approved linking the FDI cap in the pension sector to that in the insurance sector.
Though sentiment in the steel sector continues to look subdued, remain bullish on Tata Steel Ltd. The company's upcoming 3 mln tn steel plant in Jamshedpur is expected to increase sales volumes, which in turn is seen improving its profitability. The domestic steel sector has five main regulatory drivers such as government's iron ore mining clean-up drive, coal mine de-allocation, local disturbances, new mining bill, and process of giving clearances to new mines and projects. The government's iron ore mining clean-up drive will continue to hurt JSW Steel Ltd as it lacks captive mines to meet its demand, while Tata Steel, Steel Authority of India, and Jindal Steel & Power Ltd would benefit since constrained supply of ore gives these companies a competitive advantage given their captive mine sources.
