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Nifty @ 10000 – Which sector to follow now !!?!

India was the world’s third-largest steel producer as per 2016 data. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India’s manufacturing output. The Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernisation and up-gradation of older plants and higher energy efficiency levels.

Steel Info Graphic

Steel demand has outpaced supply over the last five years

  • Driven by rising infrastructure development and growing demand for automotives, steel consumption is expected to reach 104 MT by 2017.
  • It is expected that consumption per capita would increase supported by rapid growth in the industrial sector, and rising infra expenditure projects in railways, roads & highways, etc.

Shares in Production: SAIL and Tata lead the way

  • As of FY16(1), SAIL was the leader in India’s steel sector with the company accounting for 13% of country’s finished steel production and 15.8% of country’s crude steel production.
  • Tata Steel, another household name in the country, leads private sector activity in the steel sector. During FY16(1), the firm accounted for 10.33% of finished steel production and 11.03% of the country’s crude steel production

Some of the major investments in the Indian steel industry are as follows:

  • Jindal Stainless (Hisar) Limited, India’s largest stainless steel producer, has entered into the defence sector by signing an agreement with Defence Research & Development Organisation (DRDO) to manufacture high nitrogen steel (HNS) for armour applications.
  • JSW Steel Ltd plans to set up two plants of 10 million metric tonnes each in Odisha and Jharkhand, which would require an estimated investment of Rs 40,000 crore (US$ 6.21 billion) per plant. The planned investments will double the company’s production capacity to 40 million metric tonnes by 2030.
  • Tata Steel has signed an agreement to purchase a majority 51 per cent stake in Creative Port Development (CPDPL), which has a concession agreement with the Odisha government to develop a 10 million-tonnes-per-annum (MTPA) Subarnarekha port at Chamukh village in Balasore district of Odisha.
  • ArcelorMittal SA is looking to set up a joint venture (JV) factory in India with state-owned Steel Authority of India Ltd (SAIL), to manufacture high-end steel products which could be used in defence and satellite industries.

Some of the other recent government initiatives in this sector are as follows:

  • The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 targets 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030.
  • Metal Scrap Trade Corporation (MSTC) Limited and the Ministry of Steel have jointly launched an e-platform called ‘MSTC Metal Mandi’ under the ‘Digital India’ initiative, which will facilitate sale of finished and semi-finished steel products.
  • The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs 200 crore (US$ 30 million).

Today metal sector is in play up by 1.73%, Level 12306 was acting as a strong resistance as we find multiple peak highs has been made in the past . Today metal index open with the gap up by crossing all the hurdle indicate some more upside move is expected. On upside 12733 would be the level to watch in coming trading session were we can now have focus on Tata steel and Hindalco while VEDL Q1 number have already come robust.

Continuing Further, Commodity prices related to metal sector continues to shows interesting bullish setups. Attached are couple of commodity charts Zinc, Aluminum, LEAD and Copper. Looking towards the medium term charts, Commodities are expected to witness some sharp up move in recent future.

ZINC

zinc

The corrective ABC pattern completes with Zinc prices dropping to 38.2% retracement levels of the recent advance. This level also confluence of lower levels of the down-sloping parallel channel. Recovery has been witnessed with strong up move from the levels while breakout waits. Couple of week’s consolidation at current levels shows loss in momentum without damage in price, Hence. Prices are poised to head higher and stage breakout.

ALUMINUM

aluminium

The slight downward inclined sideways range has been for quite a while. The range started to emerge with start of this year while price moving towards testing the medium term trend-line. Price thereafter has moved higher to stage breakout from the range and sustains with gains.

LEAD

lead

Overhead resistance levels turns to become strong supports. Twice tested the low was 61.8% retracement of the current advance with additional support of the resisting trend-line. The sharp up-move in recent was followed by two to three weeks consolidation but failed to break below the overhead trend-line levels. Price has bounced back testing and shows probable formation of Bullish flag pattern. This increases the probability of prices moving higher.

COPPER

copper

Another commodity that is heading towards strong resistance levels. 415 levels have acted as strong inflexion point where previous couple of consolidations and recent highs have been placed. Rounding formation seen throughout the trading range on higher time-frame with more than 2 years of consolidation is what is witnessed so far. One should keep strong watch on this.

Altogether, it is clearly a bullish scenario in metal sector. New expansion plans, Government initiatives have already coming through on the streets and seems like Metal sector in on revival of its uptrend.

From metal packs Hindalco, TATA Steel and VEDL shows attractive pattern breakout in long time frame chart.

HINDALCO

Hindalco shows decisive breakout from Trend line after finding resistance earlier for couple of time and has witnessed declines. This time stock gathered strength near the trend line and consolidating near the same for couple of months which is bullish signal and indicates further upside is possible in this counter. As well looking at price pattern, stock has registered breakout from long rounding pattern which also suggests upside move likely and price may extend towards its previous peak looking at the overall price pattern.

VEDANTA LTD

VEDL shows breakout from long term falling trendline resistance where stock has witnessed selling pressure. Positive Q1 results helped price to stage higher and giving breakout from rounding pattern and long term falling trendline resistance. Price continue to trade above trendline price can move higher towards 316-320 levels to test its previous resistance zone. Thus any dips towards supports can be used as buying opportunity.

TATA STEEL

Looking at the monthly chart stock has moved up very well after giving a decisive breakout from the long term falling trend line resistance zone. Currently we find 580 would be the next resistance as we find Fibonacci contra 100% level and the previous high zone. Once hold and sustain above 580 can open the door for 684 which is also a 127% of the Fibonacci contra swing and the previous peak high. As well RSI is trading near 10 yr high reading level (70) which shows strength and support bullish view on price.

India is expected to become the second largest steel producer in the world by 2018, based on increased capacity addition in anticipation of upcoming demand, and the new steel policy, that has been approved by the Union Cabinet in May 2017, is expected to boost India’s steel production.* Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.

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