Metal stocks rally as Morgan Stanley turns constructive on steel sector; Tata Steel, SAIL up 3%

Tata Steel

International brokerage Morgan Stanley turned more constructive on the steel sector, as a result of the improving demand trends and favorable global macro conditions.

According to the brokerage, domestic steel prices may expand going ahead as consumption picks up momentum. Further, the “China anti-involution” theme will also support sentiment in international markets. With these drivers in play, Morgan Stanley has raised its steel price estimates by 3 percent each for FY27 and FY28.

China has plans to cut steel production between 2025 and 2026, according to an official document reviewed by Reuters, in an effort to tackle overcapacity. A reduced steel output from China will likely lower dumping of cheap metals into the Indian market, which in turn could benefit Indian metal players.

Within the sector, the brokerage sees select stocks outperforming the broader India materials space over the next few months. JSW Steel has been upgraded to an overweight rating with the target price revised upward to Rs 1,300. Tata Steel has also been upgraded to overweight, with the target price raised to Rs 200. For SAIL, Morgan Stanley moved to an equal-weight stance, increasing the target to Rs 140.

Meanwhile, Jindal Steel continues to be rated equal-weight, though the target price has been revised upward to Rs 1,150. Overall, the brokerage believes the sector is well positioned for an upswing as steel spreads expand, supported by domestic demand recovery and improved global market conditions.

At 10.20 a.m., the Nifty Metal index was among the top sectoral gainers, rising 1.2 percent. SAIL, Tata Steel, and Llyods Metals were the top gainers in the pack, rising between two to four percent each.

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