Nifty Metal Index Soars 2% Amid Positive Brokerage Reports On The Sector; Coal India & JSW Steel Lead

The Nifty Metal index snapped its three-day losing streak, rallying nearly 2% on the back of gains in key players such as JSW Steel, Tata Steel, and Hindalco. This strong rebound was driven by upward revisions in target prices from major global brokerages, Macquarie and Morgan Stanley. The positive momentum was underpinned by robust domestic fundamentals and easing input costs, key factors cited by analysts as reasons for their optimistic outlook.

As of midday, 14 out of the 15 stocks in the Nifty Metal index were trading in the green, registering gains between 0.2% and 3.5%. Leading the charge was JSW Steel, which surged over 3.5%, hitting an all-time high of Rs 988 per share. The rally in JSW Steel, which is also part of the Nifty 50 pack, helped boost the entire sector.

The positive sentiment was largely driven by Macquarie's decision to upgrade its outlook on several metal stocks, including JSW Steel, Coal India, Jindal Steel & Power (JSPL), and Tata Steel. Macquarie's upward revisions come as a welcome relief for a sector that has been facing headwinds, particularly as input costs are now showing signs of easing. The brokerage believes that the domestic fundamentals of the sector remain resilient, creating a favourable environment for growth.

JSW Steel was the primary beneficiary of Macquarie's reassessment, with the brokerage upgrading the stock to an 'Outperform' rating. Macquarie raised its target price for JSW Steel to Rs 1,077 from Rs 884, implying an upside potential of over 13% from its previous close.

In a similar move, Macquarie increased its target price for Tata Steel to Rs 171 from Rs 162, while raising Coal India's target to Rs 541 from Rs 465. Coal India's upward revision is driven by the company's focus on cost control, volume growth, and a 5% dividend yield. For Jindal Steel & Power (JSPL), Macquarie hiked its target to Rs 1,170 from Rs 1,070 per share.

Hindalco also saw a boost, with Macquarie raising its target price to Rs 760 from Rs 597. The brokerage emphasized Hindalco's strength in the aluminium sector, supported by firm alumina prices and strong downstream packaging demand. The new target suggests an 11% upside potential for Hindalco from its previous close.

While Macquarie remains optimistic about the sector's prospects, Morgan Stanley struck a more cautious tone. The brokerage upgraded JSW Steel and JSPL to an 'Equal-weight' rating while raising their target prices. JSW Steel's target was lifted to Rs 895 from Rs 815, and JSPL's target moved to Rs 970 from Rs 885. However, Morgan Stanley maintained an 'Underweight' stance on Tata Steel and SAIL, highlighting concerns over valuations and the lack of short-term triggers for a significant upside.

Morgan Stanley's analysis points to a challenging environment for steel stocks, which have underperformed the broader market despite strong domestic demand. The brokerage noted that although demand remains solid, the sector faces stiff supply-side competition, making it difficult for companies to maintain price premiums. As a result, Morgan Stanley lowered its target price for SAIL to Rs 105 from Rs 110 and kept Tata Steel's target unchanged at Rs 135 per share.

Macquarie and Morgan Stanley's differing perspectives reflect the complexity of the current environment for metal stocks. On one hand, Macquarie sees opportunities for growth driven by favourable domestic conditions, easing input costs, and the possibility of upward movement in commodity prices over the next 6-12 months. On the other hand, Morgan Stanley's cautious stance reflects concerns about overvaluation and the absence of significant upside triggers for steel stocks, which have lagged behind the broader market in recent months.

The Nifty Metal index has been under pressure in recent months, posting negative returns since July. The sector's performance had been weighed down by high input costs and market volatility. However, the recent rebound, driven by positive broker revisions, signals that the sector may be poised for a turnaround.

*Inputs from Moneycontrol*