Tata Steel can outperform on Corus exposure

CNBC-TV18’s Executive Editor, Udayan Mukherjee

Steel companies already got brutalized quite a bit. This sector is quite bit a big underperformer. This might sentimentally knock them back a bit you saw what was going on with SAIL yesterday I think people generally had the sense of what is coming. So I don’t know how much more incremental damage might happen to steel stock prices. But they could remain rangebound stocks generally tend not to outperform in these kinds of scenarios where the government policy is a big threat. There is just one thing- I heard a lot of steel producers say yesterday this is just a temporary measure it will not last beyond a quarter. I don’t think they have much choice if inflation does not cool down in the next three-months who is to say the government will not sit across the table once again and say, 'sorry we can’t let you raise prices because inflation is still not under control.' So there are many ifs and buts I think this will remain a bit of a niggling persistent problem and rein in outperformance for the sector.

If we have to be in the sector, I think there is only one stock who can be in now which is Tata Steel because that’s the only one which is got a global play- I mean if you just look at Tata Steel’s consolidated numbers most of it or a very large part of it comes from Corus where thankfully there is no Government of India trying to rein in prices. So whatever Tata Steel loses in the domestic market because of price checks they will make up more because of Corus’s performance. Of course raw materials remain a joker in the pack.

So you might see the sector remaining a rangebound sector right now, in that sector I would imagine that if one stock has to outperform it would still be Tata Steel on back of the Corus exposure. The others will find it difficult given how raw materials are going up and how prices are being checked.