Metals Bloodbath To Halt Or There's More Steam Left? | D&V Safe Ace Strategies

Metals stocks plunged after government imposed hefty duties on exports of steel making raw materials like iron ore and pellets in an attempt to discourage exports and tame inflation.

Metals stocks are down about 30 - 55% from record highs post govenment's jolt to levy export duties. How far can the metal majors extend losses from here? Here's what our analysis indicates:

Nifty Metal: 1D (Daily) Technical Chart

The above technical chart has been simplified to a great extent to highlight just key details for our readers to avoid any possible confusions. Nifty Metal index clearly had a bearish Head and Shoulders pattern on the daily technical chart. This bearish pattern often indicates trend reversal for the stock/sector upon its formation on technical charts. The metal index witnessed a breakdown for this bearish pattern when govenment decided to slow down metal exports.

We believe there's a set of final jolt left for the metals yet and the index may plunge further upto 4,185 and 3,761 respectively. The major correction may most probably end anywhere in this range of 4,185 - 3,761. Aggressive investors may eye selective metals to ride the recovery phase that the metals may witness in months to come post completion of H&S pattern correction.

If I were to name one metal stock that both aggressive and conservative investors may consider having in their portfolio, it would be Tata Steel without a second thought.

This steel major is down 44% from record high of 1534 in less than a year. Stock trades at a p/e of just 4 times and a dividend yield of 4.5%. Price/Sales ratio for the stock is around 0.43 which is another factor that makes the stock attractive. The company has repaid significant debt in 2021-2022. Moreover, the shares are presently available with a stock split of 1:10. Record date will be released soon in a few weeks. We believe 775 - 860 (before split) is a decent range to have Tata Steel on radar for a target price of 1135 and 1480 (without adjusting for split) with a medium - long term perspective.


Disclaimer: We are not SEBI Registered. The above mentioned analysis is not a recommendation and is mentioned here for educational purposes only. Do consult your financial advisor before making any decision regarding your investments.

73 views0 comments