Tata Steel vs Jindal Steel: Which stock is a better pick in volatile market?

Shares of Tata Steel and Jindal Steel & Power, two major metal producers, have been largely trading in the green zone since December 23 last year. The surge in the metal scrips comes as China has started easing its Covid policy and unveiled measures to support its ailing property market.  Any  positive development on the macroeconomic front in China is likely to boost prospects of the Indian steel stocks, say analysts. Shares of Tata Steel have surged 17.70% or Rs 18 since December 23, signaling the stock is in an uptrend in the last 17 days. In the current session, the Tata Steel stock was trading 0.17% lower at Rs 118.60 against the previous close of Rs 118.85 on BSE. It hit an intraday high of Rs 120.35 in early trade.

Earlier, Tata Steel shares opened higher at Rs 119.30. Total 9.05 lakh shares changed hands amounting to a turnover of Rs 10.81 crore on BSE. Market cap of Tata Steel rose to Rs 1.45 lakh crore. The stock has gained 45.50% from its 52-week low. The stock hit a 52-week high of Rs 138.63 on April 6, 2022 and a 52-week low of Rs 82.71 on June 23, 2022 on BSE. The large cap stock is trading 13% lower to its 52-week high.

On the other hand, shares of Jindal Steel & Power have risen 16.46% since December 23 last year.  The stock hit a 52 week high of Rs 610.25 in the current trading session.  At 11:08 am, the Jindal Steel stock was trading 0.96 percent higher at Rs 604.85 against the previous close of Rs 599.10 on BSE. Earlier, it opened higher at Rs 603.95. Total 0.50 lakh shares changed hands amounting to a turnover of Rs 3.03 crore on BSE. Market cap of the firm rose to Rs 61,613 crore. The stock hit a 52-week low of Rs 304.20 on June 22, 2022 on BSE.

The JSPL stock has been rising for the last two sessions after the firm said it would invest up to Rs 1,500 crore to make recently acquired Monnet Power operational. The investment will be made over the period of the next 12 to 18 months, Managing Director Bimlendra Jha said.

In terms of technicals, the relative strength index (RSI) of Tata Steel stands at 62.7, signaling it's neither oversold nor undersold. Tata Steel stock has a one-year beta of 1.3, indicating high volatility during the period. Tata Steel stock is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

In terms of technicals, the relative strength index (RSI) of Jindal Steel stands at 64.2, signaling it's neither oversold nor undersold. Jindal Steel stock has a one-year beta of 1.4, indicating very high volatility during the period. Jindal Steel shares are trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

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In terms of returns over different timeframes, Tata Steel stock has gained 5% in a year and risen 5.5% in 2023.  On the other hand, Jindal Steel and Power shares have surged 57% in a year and gained 4.23% this year.

Here’s a look at what analysts and brokerages said on the prospects of the two leading metal players and what strategy should investors adopt toward the two shares.

Tata Steel  

Brokerage Jefferies has assigned a buy call to the firm against the previous hold stance. While turning positive on Tata Steel, the brokerage has given a 12-month target of Rs 150.

"After almost a year of cautious view, we turn positive on India metals. China has started to ease Covid policy and support its ailing property sector. We believe worst-margin quarter for Indian steel, and the big chunk of earnings cuts for Tata Steel and Hindalco are behind," Jefferies said.

Jefferies said it likes Tata's improving asset footprint with share of India in total volumes up from 33 per cent  in FY15 to 62 per cent in FY22. Tata's 5mtpa brownfield expansion should also start contributing to volumes by FY25, it said, adding that the brokerage expects share of higher-margin India-business in Tata Steel's consolidated volumes to rise to 67 per cent by FY25E.

"We expect Tata Steel to generate negative free cash flow (after interest payment) in FY23 with NINL acquisition and working capital outflow, but see this turning positive in FY24-25E to Rs 11-13 per share," it said.

ICICIdirect expects Tata Steel to move toward Rs 127, which is 80 per cent retracement of April-June 2022 decline (R138-83) over the next few months while strong support is placed at Rs 98.

On the technical side, ICICIdirect said Tata Steel's share price is seen resolving out of six months base formation, which resembles a cup and handle bullish formation. It said the stock has formed a strong base around Rs 100 over the past few months, factoring in a host of negatives. The brokerage said last week's price action formed a Bullish Engulfing candlestick that led to a breakout above its six month's range, indicating a revival of the positive trend.

Abhijeet from Tips2trade said,"Tata Steel needs to close above Rs 119.6 on the Daily charts to move up to Rs 126-132 in the near term. Currently trend is weak and long investors should keep a strict stop of Rs 117.6."

Jindal Steel  

Pravesh Gour, Senior Technical Analyst at Swastika Investmart has given a buy call for the stock with a target price of Rs 640. He has advised keeping a stop loss of Rs 510. "The stock is in a classic uptrend, as evidenced by higher highs and higher lows. It has more than doubled from its low of Rs 304 (June 22) to Rs 600-levels. The counter's overall structure is impressive, as it is trading above all of its key moving averages. On the upside, the stock is facing resistance at Rs 600–610 levels as a psychological hurdle. Above this, one can expect Rs 640 level in the near term. In the past, the stock reversed after a short-term up-move and witnessed profit booking. As a result, traders should look for a dip around Rs 560-575 for a Rs 640 target with a stop loss placed at Rs 510," said Gour.

ICICI Securities has assigned a target price of Rs 750 to the metal stock. JSPL stock is the brokerage’s top pick in the ferrous space. “We raise our FY24E EBITDA by 24%. Besides, a combination of DRI and BF-based iron making at Angul gives the company operating flexibility and an opportunity to optimise costs. We value JSPL at an unchanged multiple of 6x FY24E EBITDA (1 deviation above 5-year trading average). Our revised target price works out to Rs 750 (earlier: Rs605). We maintain BUY on the stock,” said the brokerage.

Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One said, "Jindal Steel has seen outperformance over Tata Steel in the recent period, with its surge of 2X returns in the past six months, while Tata Steel has seen a nearly 1.5X jump during the same period. However, there is no thumb rule for the performance to remain the same as various macro and micro factors pitch in for the price action. From the technical perspective, both stocks are placed in a lucrative zone and are likely to trade with positive bias from short to medium-term time frame."

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