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Stocks of major steel companies are seen consolidating in the coming sessions tracking the trend in the domestic market, where the previous three sessions rally is unlikely to sustain. Movement in steel stocks will be largely market driven next week on continued weak fundamentals of the sector that have already been discounted.
Domestic share market is expected to consolidate next week as it has already risen significantly. Both, Nifty and the Sensex saw a 4.5% rise this week. The market will be closely eyeing Parliament's debate and voting on 51% foreign direct investment in multi-brand retail next week.
In the steel sector, low domestic demand for steel has increased supply of the alloy, as producers have not reduced their plant capacity utilisation. The consequent imbalance in demand-supply scenario continues to weigh on steel companies to some extent. More than any steel stock, we would recommend buying in iron ore miner NMDC (Ltd).
Though high iron ore pricing by NMDC is not allowing it to sell much of the ore in the market, the issue seems to be short-lived, as compulsory buyers will have to make some purchases. Last week, NMDC's e-auction for iron ore lumps found few takers with less than one-tenth of what it put up for sale changing hands due to high pricing.
NMDC has increased the base price for iron ore having more than 60% ferrous content, as the requirement for this is higher than other grades. Price level offered by the miner also is above international iron ore prices.
