F&O Buzzer | Positive commentary, Budget makes Tata Steel a traders' darling

2023-02-15 16:56:31 By : Ms. Jessie Zeng

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Tata Steel blipped aloud on traders’ radar on January 18 on the back of upbeat trading in metals. The stock zoomed along with a spike in open interest, giving a clear indication of a bullish setup.

This comes amid commentary from CLSA that the said outlook for steel stocks has improved.

“A faster reopening in China and stimulus have provided a new lease of life for the sector, although on-ground demand improvement is still elusive,” CLSA said. “US recession now looks imminent but could be shallower than earlier expectations. While domestic demand is resilient, large steel capacity addition could keep dependence on exports high.”

The broker expects steel prices to rise in the near term (in line with or at a discount to import parity) before softening in the following quarters.

TV Narendran, MD, Tata Steel, said that following a tough second quarter in the domestic market and equally tough third quarter in Europe, the company sees better times now. Its India business has seen a margin improvement, while the European steel market too is swinging into the green, according to him.

The positive commentary helped the stock zoom 3 percent to Rs 122.40 as of 12.30am. It has seen some demand recently, leading to a 10 percent rise in last month and 35 percent over the last six months.

Massive Put writing was seen at 120 strikes, indicating that the market sees it as a new support for the stock. Meanwhile, Calls were being written at 122 and 123 strikes. Overalls, open interest rose by 7 percent on January 18.

Manish Shah, a Sebi-registered investment advisor and a trader, said there was intraday trading opportunity in Tata Steel.

Analysts also attributed some of the gains in the stock to upcoming Union Budget. Usually, metal and mining sectors keep bussing ahead of the Union Budget and traders expect some announcements.

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