Brokerages see Indian steelmakers in a sweet spot; JSW Steel, Tata Steel, JSPL surge 1-3%

Morgan Stanley raised its estimates for the steelmakers, anticipating the stocks tot do well over the next few months.

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26 Aug, 2025 12:21

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Shares of steelmakers--JSW Steel, Tata Steel and Jindal Steel and Power--surged 1-3 percent in early trade on October 3 on the back of a bullish outlook for the sector as painted by a few global brokerages. Thanks to gains in these counters, Nifty Metal emerged as the top performing sectoral index, gaining 0.6 percent.

Brokerage firm Morgan Stanley upgraded its rating as well as price targets for three steel-making companies amidst expectations that China's recent stimulus, aimed to revive its economy will yield a positive sentiment in steel and support its prices.

The brokerage also sees a lower risk of imports, which should further support spreads in the near-term. Likewise, Morgan Stanley raised its estimates for the steelmakers, anticipating the stocks tot do well over the next few months.

Morgan Stanley was also joined by Nomura, which sees India steel companies in a sweet spot amid the global metals sector. The brokerage remarked that ongoing deleveraging and rising domestic demand, especially from the automobile sector, will continue to support Indian steel majors.

Nomura also highlighted that companies like JSW and JSPL are progressively achieving an optimal capital structure through ongoing deleveraging efforts, even amid downturns. This strategic move, according to the brokerage, is expected to reduce their cost of capital as the risk of default diminishes.

Historically, the high debt levels in the sector have contributed to elevated costs of equity. However, Nomura believes that current macroeconomic factors—such as lower risk-free rates and market risk premiums—combined with industry-specific developments like deleveraging, will lead to a decline in the cost of equity for these firms.

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Baking in the optimism from these trends, Nomura initiated coverage on Jindal Steel and Power and JSW Steel, assigning both a 'buy' tag with price targets of Rs 1,200 and 1,220, to imply upside potentials of 17 percent and 22 percent, respectively.

Alongside, Morgan Stanley upgraded its rating and price targets for Jindal Steel, JSW Steel and Tata Steel. JSPL and JSW Steel were raised to an 'overweight' call, along with a 24 percent and 28.5 percent spike in their price targets to Rs 1,200 and Rs 1,150, respectively.

Tata Steel was also upgraded to  an 'equal-weight' call while its price target was raised nearly 30 percent to Rs 175. On the other hand, while Morgan Stanley retained its 'underweight' call on Steel Authority of India, it raised its price target by 20 percent to Rs 125.

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