4 key reasons why Jefferies remains positive on metals with Tata Steel, Hindalco as its top picks

Stock Market today- The Nifty Metals index with gains of almost 9% in a month has outperformed the Nifty -50 index that has lost almost 4% during the same period. The expectations of safeguard duty by the government of India, the expected pick up in demand from China and base metal prices as that of Aluminium holding up steady despite multiple concerns on Trumps Tariff and trade war, as per analysts.

Jefferies India Pvt Ltd remains constructive on metals sector. As per Jefferies analysts Asian steel spread remains 20% below long-term average and has scope to expand. Indian steel prices are up 5% from December trough, and any safeguard duty can provide further support, boosting margins and valuations. They remain positive on metals with a buy ratings on Hindalco and Tata Steel.

Four key reasons

1.Metals Outperform during calendar year to date –                        

Metal stocks such as Hindalco Industries Ltd, Tata Steel Ltd and JSW Steel have outperformed Nifty-50 by 15-20% Calendar year to date driven by optimism on China recovery, expectations of safeguard duty on steel in India, and aluminum prices holding up well, said Jefferies analysts. Jefferies global strategist, Chris Wood, believes that China’s residential property market might have bottomed last quarter as secondary property market data continues to improve in major Chinese cities; secondary home prices in tier-one cities in China rose by an average 0.18% Month on Month in January 2025, the fourth straight month of month on month increase

2. Soft steel Margins may recover while Aluminium margins are firm- The price of aluminum increased 7% Calendar year till date globally, surpassing China’s 3% decline in steel.

China’s steel exports in Calendar year 2024 were the greatest in ten years, despite the country’s net deficit in basic aluminum.

The Asian gross steel conversion differential is around 20% lower than the long-term average and might rise, particularly if the Chinese real estate market begins to rebound.

3. Safeguard duties could lift Indian steel prices: India’s local Hot Rolled Coil (flat) steel pricing that corrected 15% between June and December, have since recovered 5% from its lowest point and are currently at 3% premium than landing imports from China. India continues to import a lot of steel, and any safeguards imposed on Chinese imports could support prices.

A Rs1000 a tonne rise in steel price could lift FY26 estimated EBITDA for Tata Steel and JSW Steel 7% and 9% respectively and FY26 estimated earnings per share by 17% and 23% respectively as per Jefferies, assuming everything else remains unchanged.

4. Remain constructive on Sector: Jefferies says “we maintain our constructive stance on India metals with Buys on Hindalco and Tata Steel. For JSW Steel they have Hold ratings

Hindalco India’s aluminum business is delivering well with global aluminum prices holding up (spot aluminium at $2,708 atonne versus Jefferies FY26-27 assumption of $2,600-2,650). The Novelis margin concerns are also alleviating

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.