Tata Steel shares: 52-week high can act as breakout level for Tata Group stock; here’s why

Shares of Tata Steel Ltd have traded in a range for a major part of 2023. The Tata Group stock, which ended at Rs 122.60 on January 18, 2023 ended at Rs 127 in Monday’s session on BSE. Tata Steel stock has gained 6.50% in 2023 and risen 27% in the last one year. The metal stock, which posted a loss of 7.55% in the last two years has delivered 222.42% in three years.  The stock hit a 52 -week high of Rs 134.85 on September 18, 2023 and a 52-week low of Rs 98.10 on October 17, 2022.  

In the current session, the Tata Group’s metal stock ended 1.60% higher at Rs 127 against the previous close of Rs 125 on BSE. Total 15.38 lakh shares of the firm changed hands amounting to a turnover of Rs 14.80 crore. Market cap of the Tata Group firm stood at Rs 1.55 lakh crore in  Monday’s session. The stock has a beta of 1.2, indicating high volatility in a year.   

In terms of technicals, the relative strength index (RSI) of Tata Steel stands at 47, signaling it's neither trading in the overbought nor in the oversold zone. Tata Steel shares are trading higher than the 5 day, 10 day, 50 day, 100 day, 150 day and 200 day but lower than the 20 day and 30 day moving averages.            

Here’s a look at what technical analysts and brokerages said on the outlook of the Tata Group stock.    

Last week, Fitch Ratings upgraded its issuer default rating (IDR) to 'BBB-' from 'BB+' while keeping its outlook 'stable'. Fitch Ratings said it has also upgraded the rating on ABJA Investment's (Tata Steel arm) $1billion notes due in July next year to 'BBB-' from 'BB+'. The notes are guaranteed by Tata Steel. 

The upgrade, Fitch Ratings said, follows a revision in Tata Steel's standalone credit profile to 'bb+', from 'bb', on the reduction in uncertainty and financial risk from its UK operations. 

ALSO READ: Tata Steel shares deliver single-digit returns in 2023; time to buy, sell or hold?

Mileen Vasudeo, Senior Technical Analyst at Arihant Capital Markets suggested a hold stance for the Tata Group stock. One can fix a stop loss of Rs 118 for a target price of Rs 139-145.  

"On the daily chart of Tata Steel, we are observing a sideways move and are giving no clear direction of trend. At present, the stock has good support at Rs 122-120 level. Even the momentum indicator RSI is trading sideways. However, the stock is outperforming the benchmark indices. Hence, one can hold the stock at current levels with a stop loss of Rs 118 for targets of Rs 139-145 levels in the next couple of weeks," said Vasudeo. 

Incred Equities has assigned a reduce call on the stock with a target price of Rs 70.   

In a bear case scenario, the brokerage said, "With high inflation and rising interest rates, the Western world will see steel demand destruction, leading to a massive destocking-led fall in prices."  

"In the foreseeable future, the steel market is likely to experience sustained downward pressure, resulting in no improvement in steel spreads. We value Tata Steel at 0.7 times FY23F BV to arrive at a target price of Rs 70. Retain REDUCE rating on it," added the brokerage.  

Pravesh Gour, Senior Technical Analyst at Swastika Investmart was of the view that one could hold Tata Steel for a target price of Rs 142. Stop loss of Rs 123 should be fixed.  

"Tata Steel witnessed a breakout of a triangle formation on the daily chart. It retested its previous breakout and started a new leg of rally towards Rs 135 level. The overall structure looks good for short-term trade as it is trading above its key moving averages. On the higher side, Rs 135 is the susceptible level; above this, Rs 142 is the near-term target for the counter. Place a stop-loss at Rs 123," said Gour.  

ALSO READ: Tata Steel shares rebound 35% from 52-week low; can they hit Rs 150 mark?

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher expects Tata Steel stock to hit the target of Rs 150 level.  

"Tata Steel stock has resistance near Rs 135 zone and it's cooling off to some extent with near-term support at Rs 123 level. A decisive breach above Rs 135 zone shall trigger a breakout with next expected target of Rs 145-150 levels," said Parekh.  

ICICI Securities has maintained an add call to the stock with a target price revision to Rs 150 from the earlier Rs 135.    

"The development around Tata Steel UK is likely to ensure the future readiness of the business from both profitability and ESG perspective. We expect both additional restructuring costs  and  policy  support  as  consultation  process  picks  up. Taking cognizance of  better  operating  prospects  of  Tata  Steel UK and  reduced  support  from  the parent, we raise our valuation multiple to 6x (earlier 5.5x),resulting in a revised target price of Rs 150 (earlier Rs 135). Maintain ADD rating on Tata Steel stock,” the brokerage said.    

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.