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Tata Steel jumps 2% as investors shrug off Citi's concerns

Domestic steel prices have fallen for 6th consecutive week. Below Rs 40,000/ tonne for first time since Dec 2017.

ETMarkets.com|
Updated: Jul 16, 2019, 03.53 PM IST
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NEW DELHI: Shares of Tata Steel were up 2 per cent in Tuesday's trade even as foreign brokerage Citi warned of a negative surprise in June quarter results. The brokerage is expecting Tata Steel to report weak numbers for the quarter on weak volumes.

The brokerage said it has opened a 30-day 'negative' catalyst watch on the steel maker. Tata Steel has indicated that liquidity issues in India have impacted demand, it said.

Citi said it has maintained its ‘sell’ rating on the scrip with a target of Rs 435, owing to weak steel price and China worries.

Domestic steel prices have fallen for the sixth consecutive week. They are below Rs 40,000 per tonne for the first time since December 2017. This has led to raw material spreads plunging to two–years’ low, said Edelweiss Securities.

“Coupled with the onset of a seasonally weak demand period, we see further profitability headwinds, notwithstanding expectations of a weak Q1FY20,” Edelweiss Securities said in a note.

Credit Suisse, meanwhile, said EU steel prices have recovered Post output cuts by Arcelor.

“Expect more hikes as we enter strong August-September season,” it said while staying positive on Tata Steel, JSW Steel and JSPL.

ICICIdirect said that Tata Steel is focusing on stabilising its European operations while also focusing on other potential alternatives, post the cancellation of the proposed JV with ThyssenKrupp.

“The resumption of operations of blast furnace 5 at Port Talbot in January 2019 and investments made to increase the life and reduce maintenance costs is expected to reduce the overall operating costs auguring well for company,” it said.

The shares of the company closed 1.77 per cent higher at Rs 476.50 on BSE.
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