Tata Steel, Hindalco, JSW Steel Buzzing: Why Metal Stocks Are Outperforming Nifty 50?

Driven by China's recovery and expectations of safeguarding duty on steel in India, metal stocks have outperformed Nifty-50 by 15-20% in the current calendar year so far. Potential safeguard duties on Chinese imports by the Indian government and strong aluminum prices can further strengthen metal stocks performance in the coming months, according to Jefferies.

The brokerage firm remained constructive on Indian metals and maintained 'buy' target for Hindalco and Tata and 'hold' on JSW Steel. Multiple metal sector stocks, including Hindalco, JSW Steel, Tata, Coal India, SAIL, etc have outperformed Nifty in the past three months of the current year. Amid continued weak market sentiment, which steel sector stock should investors buy for coming months? Know from Jefferies experts.

Metal Stocks

Which stock to buy?

While maintaining a constructive stance on the Indian metal sector, Jefferies has put 'buy' ratings for Hindalco and Tata Steel, and 'hold' for JSW Steel.

"We maintain our constructive stance on India metals with Buys on
HNDL & TATA; we have Hold on JSTL," said Jefferies in its report on March 10. It also noted that Hindalco India's aluminium business is delivering well and can perform better in the coming days with assumption of "global aluminum prices holding up (spot at $2,708 vs our FY26-27 assumption of $2,600-2,650)."

Company	Rating	CMP (Rs)	Price target
Hindalco	Buy	690	800
JSW Steel Limited	Hold	1009	920
Tata Steel Ltd	Buy	150	180

Steel stocks are trading expensive

Underlining the overpriced valuation of Indian steel stocks, Jefferies expressed that valuations are likely to be sustained amid healthy volume growth outlook and potential for safeguard duties.

"TATA is trading at 1.9x FY26E PB for 11-14% FY26-27E ROE; we retain Buy on TATA and revise PT to Rs180 (vs Rs165 earlier). JSTL is trading higher at 2.8x FY26E PB for 12-14% FY26-27E ROE; we retain Hold on JSTL with revised PT to Rs920 (vs Rs850 earlier)." it added.

Why are Indian metal stocks strong amid weak market sentiment?

The Indian stock market closed the day on a weak note after the frontline indices-the Sensex and the Nifty 50 ended the day in red on Wednesday. The Sensex closed around 73 points lower at Rs 74,029.76. Meanwhile, Nifty 50closed at 22,470.50, down 27 points, or 0.12 per cent today.

As BSE Sensex and Nifty 50 continue their weak performance, Jefferies expert believes that Indian metal sector stocks will maintain their valuation in the coming weeks. Here are three reasons why Jefferies remain constructive on the Indian metal sector.

Strong performance in the current year

Metal sector stocks have outperformed Nifty 50 over the past three months. As per Jefferies, Hindalco, Tata Steel, JSW Steel and other sector stocks have beaten the Nifty-50 by 15-20% in calendar year to date. The strong growth was fuelled by China recovery, expectations of safeguard duty on steel in India, and aluminium prices holding well.
Analyst Christ Wood opines that China's residential property market might have bottomed last quarter, as secondary property market data continues to improve in major Chinese cities. Meanwhile, China property sales also increased by 4% YoY in Nov-Dec after declining consistently since Jul-21.

Aluminium prices remained inflated over 7% in the calendar year to date. Their price outperformed steel in China, which has a net deficit in primary aluminium. Consequently, Asian gross steel has a scope to expand in the coming months, especially in China's property sector.

Potential of safeguard duties

The brokerage firm maintained a positive stance on metal sector growth, keeping potential safeguard duties implementation in the coming months. Failure to impose any safeguard duty may lead to rise in Chinese steel imports into India.