Should investors start buying into metal stocks JPMorgan overweight on sector Economic Times
Post on: 23 Июль, 2015 No Comment
(Indian metal and mining)
MUMBAI: Today’s rally in the market is powered by the BSE Metal Index which has surged over 2.8 per cent. Institutional investors have started showing interest in the sector after it corrected over 10 per cent since the beginning of 2014.
According to JP Morgan report, the Indian metal and mining (MM) equities are down
At this point we see large upside risk to consensus earnings estimates across the leveraged Indian names (TATA Steel, Sesa Sterlite, Hindalco, JSW and SAIL) with the maximum upside risk to Tata Steel as the strength in European operations is likely being under estimated by investors, the report said.
Admittedly the sector is not as under owned as it was in August 2013 (when the rally started), but ownership levels are well below historical averages and importantly, the breadth is very narrow, the report added.
Analysts at the brokerage are of the view that the leveraged Indian metal and mining equities are more of a play on a potential economic rebound/improvement in India and company specific operational improvement and less on a global commodity price rebound.
Factors that makes the brokerage overweight on the sector includes, broadly stable commodity prices against a backdrop of INR depreciation is positive; b) India companies to turn FCF positive as the peak capex cycle is behind us; c) Worst of the regulatory pressure is behind us and d) Domestic demand environment should be better in FY15-16E compared to FY13-14E.
The metal stocks have been on investors radar for some time now who have been slowly nibbling into quality stocks.
Metal could move up intraday or for a few trading sessions, not necessarily on a sustainable basis, but on the back of investor interest, Nipun Mehta, Founder & CEO, Blue Ocean Capital Advisors had recently told ET Now.
However, Avinnash Gorakssakar, Head of Research, Miintdirect.com, is not comfortable with the rally in metals sector.
I am not very much comfortable with the rally seen in the metals side. Especially if you see Tata Steel, I would be slightly cautious considering the fact that the stock clearly looks pretty weak and more importantly we have all seen that the past quarter has not been anything great for most of the metal stocks. So at least one should actually take some profits off the table because metals is a volatile space, he said to ET Now.