Steel stocks have fallen in trade today, thanks to the government's decision to impose export duties on crucial steel-making raw materials like iron ore and pellets. The export duty on all grades of iron ore has been increased 50 per cent from 30 per cent earlier. Further, the government has imposed a 15 per cent export duty on hot-rolled, and cold-rolled steel products from nil earlier.
Why steel stocks fell in trade today?
Shares in Tata Steel were down nearly 13% at Rs 1025, which JSW Steel shares also fell around 12% in trade. The belief is that there would be more supply now, thus bringing down the price of st seel products, after the government's present move. One has to still understand the implications of such a move on steel companies.
Buy the stock of Tata Steel for good gains
But, let us see some of the reasons to buy the stock of Tata Steel. The company has declared a dividend of Rs 51.50 per share, which takes the dividend yield on the stock to nearly 5%. Apart from this the stock is also available with a stock split of 1:10. This means as the stock split happens the shares could be more affordable thus boosting retail participation.
If you by pure fundamentals, we realize that the stock is trading at a p/e of just 5 times its trailing EPS, which makes the stock really attractive. One of the other reasons to be buying the Tata Steel stock is that the company has gradually been paying debt and if present prices and demand for steel continues, the company may continue to have debt reduction. Overall, the stock is now trading near 52-week lows after today's plunge in the stock price of 13%. We believe that the shares of Tata Steel on account of its low p/e, high dividend yields and debt reduction is a good stock to buy at the current levels.