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Nifty Metal Index surges nearly ~9% in the week on China stimulus hopes and steel output cuts


Metal Index surged by ~9% this week, outperforming the Nifty Index (up ~2% in the week).
This rally was fueled by China setting its GDP growth target at ~5% for 2025 and laying out stimulus measures to revive real estate market and boost overall consumption
Additionally, China is planning to restructure its steel industry by implementing output cuts, with an expected production reduction of ~50 million tons on a base of ~1,000 million tonnes. This development is sentimentally positive for domestic steel players, as it could potentially reduce the dumping of cheap steel into the domestic market, providing relief to Indian steel players.
However, similar production cuts announced in the past were not really implemented, hence its efficacy this time could be limited in nature as well.
On a positive note, the domestic steel prices have rebounded by ~₹2,000/ton from 4 years low of ~₹47,000/tonne and are currently quoting at ~₹ 49,000/tonne.
On the non-ferrous front, LME Copper price have reached 4 months high of ~$9,750/tonne, while LME aluminium prices continue to trade in the higher range of ~$2,700/tonne. Thus, the rise in metal prices is expected to enhance the earnings for non-ferrous players in the coming quarter.
Within metals, we prefer JSW Steel and Jindal Steel & Power due to their strategic capacity expansion, strong domestic demand outlook, and improving profitability prospects.
We have a BUY rating on JSW Steel at a target price of ₹ 1,130 i.e. 9x Avg FY26E-27E EV/EBITDA. Also, we have a BUY rating on Jindal Steel and Power at a target price of ₹ 1,000 i.e. 8.5x Avg FY26-27E EV/EBITDA.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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