Tata, Jindal Steel Among Top Metal Picks For Axis Securities' Aditya Welekar
Amid the valuation concerns in Indian metal stocks and challenges of global uncertainties, the analyst also expresses optimism for Vedanta.
Tata Steel Ltd. and Jindal Steel & Power Ltd. are the top picks among metal sector stocks for Aditya Welekar, senior research analyst at Axis Securities.
Among the sectoral players, both these companies still show some potential for further valuation while others have almost reached their peak, according to Welekar.
"In steel names, Tata Steel still has some value even from these levels. SAIL, we see that the valuation is now almost full. We see value in Jindal Steel and Power," he said during a conversation with NDTV Profit on Thursday.
"JSW Steel, the valuation also appears slightly full. So in the pecking order, Tata Steel, followed by Jindal Steel and Power," Welekar said.
In the non-ferrous metals space, Welekar highlighted the resilience of aluminium, copper and zinc prices amid global trade tensions. A key driver has been a decline in inventories at the London Metal Exchange, partly due to metals flowing to the US to exploit tariff-driven arbitrage and China's increased consumption of Russian metals.
Amid the valuation concerns in Indian metal stocks and challenges of global uncertainties, the analyst also expressed optimism for Vedanta.
"Vedanta is a beneficiary of aluminium LME prices. It is a beneficiary of the strength in silver prices because it has Hindustan Zinc in it and then oil prices have risen to some extent in the last few sessions, but they have now cooled down, but it will also help Vedanta," he said. "And the demerger is definitely one trigger which Vedanta will have."
Welekar expects a "good set of numbers" from steel companies for Q1. "This is because of the safeguard duty supporting HRC (hot rolled coil) prices, and then your coking coal prices are also down. That will lead to some margin expansion, which will flow into the numbers in Q1, and that is why the valuation gap, which was there, is kind of bridging out," the analyst explained.
A significant factor supporting this positive outlook is the likelihood of production cuts in China. Beijing has given indications that it may curb steel production by as much as 2% for the calendar year 2026. China's current export rate of nearly 10 million tonnes per month looks "unsustainable".
"There is the tariff impact from the US, then there are anti-dumping duties and trade restrictions coming from many countries like Vietnam, like South Korea. India has also now got a safeguard duty," he noted.
The trajectory of Indian steel stocks will be closely tied to the government's decision on whether to extend the provisional safeguard duty, which is set to expire in November. "That decision will be dependent on how the Chinese HRC prices move," he added.
