Sectoral Spotlight: Metal stocks drag Q4 earnings. How should investors trade?

By Dan Neff On May 10, 2023

Metal sector is under spotlight — this time not for the right reasons, it being an underperformer among its sectoral peers. The BSE Metal index has given negative 2% returns over a 1-year period while the Nifty Metal index has returned 3.86% returns. Adding to the gloom, the earnings posted by listed companies have also been lackluster.

Metal stocks have accounted for a 67% earnings decline for the quarter ended March 31, 2023, according to a report published by Motilal Oswal Financial Services (MOFSL). Their performances have been weaker than expected, the report revealed.

The 4QFY23 aggregate earnings of 78 companies in the MOFSL universe went up 8% year-on-year versus growth estimates of over 3%. The aggregate performance has been led by BFSI and automobiles, which reported 28% and 9% earnings growth, respectively, during the quarter. Nifty profits would have increased 22% YoY excluding metals and O&G.

Tata Steel profits plunged 83% in the January-March quarter. Within the MOFSL universe, automobiles, and metals have recorded an FY24E earnings upgrade of 3%/2%, respectively.

The brokerage is ‘underweight’ on metals. Here’s a guide to the stocks in the space you should buy, sell or hold.

Recommendations by Motilal Oswal
NMDC: Buy | Target: Rs 150 | Upside: 38%

Silver Lining
Metal sector has been in a consolidation phase over the past 12 months as high inflation and fears of a US recession have weighed on the sector, said equity market strategist Kranthi Bathini. While the uncertainties linger and a recession in the world’s largest economy could pose a setback, China’s opening from a stringent lockdown is a welcome sign, he added.

Exuding confidence in the India story, he stressed that the government’s focus on infrastructure is likely to see the sector get through the hard times. He is betting on Tata Steel and JSW Steel with a medium- to long-term view. He expects a 15-20% upside in the stock.

Meanwhile, technical analyst Nilesh Jain sees a resistance for the Nifty Metal Index around 5,900. A breakout above the same will open further upside towards 6,100, the Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking, said.

Nifty Metal index is hovering near its 200-DEMA and has support at 5,750, Jain said. He picks JSPL as his top pick in the metal pack. “It is trading above its short-term and long-term term moving averages. It is also on the verge of a breakout and then a move towards all-time high levels,” he said. The upside is open for Rs 630-650 levels whereas the support is at Rs 565, the Centrum analyst said further. On Tuesday, the Nifty Metal index ended on a high note. The 15-stock index settled at 5,835.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

For all the latest Business News Click Here

For the latest news and updates, follow us on Google News.

Read original article here

Denial of responsibility! TheDailyCheck is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected] The content will be deleted within 24 hours.