Caution On Commodity Stocks Seen Ahead

Yesterday, Ferrous Steel Stocks, were seen culprit in making market trade weak. Tata Steel fell by Rs. 132, about 10%, JSPL Rs. 35, over 9%, SAIL by Rs. 8, over 8% and JSW Steel by Rs. 48, about 7%. As these stocks were seen in an overbought zone, long liquidaton made the things worse.

Chinese realtor Sinic Holdings' share crashed 87 per cent in Hong Kong yesterday. China's second biggest realtor Evergrande plunged 11 per cent yesterday, as investors feared defaults in the Chinese real estate sector, with both seen as prominent defaulter in payment of their interest. This led to fear of big fall in the Real estate in China, leading to big Bank Defaults and lowering commodity consumption, with fall in prices to be seen, more especially in Ferrous Steel.

This had its rub off effect on our markets as well yesterday, with fall seen in share price of Ferrous Metal, Non Ferrous Metal, Cement, Sugar, Cmmodity, Chemicals etc, with weakness seen in  Banking & Housing Finance Stocks as well. This fear was partly seen unfounded, though we carried Cover Feature yesterday, on market fall as well, giving our view.

In Nutshell, we summarise our views, sector wise and stock wise as under-

NEGATIVE VIEW-
1) Ferrous Steel, like Tata Steel, JSW Steel, Jindal Steel, SAIL, Tata Steel BSL, Jayaswal Neco, Godawari Power.
2) Steel Raw Material- NMDC, Sandur Manganese, Kalyani Steels, MOIL, Mukand as also, raw material Suppliers like Coke, Coal and Electrodes etc.
3) Sugar Stocks- All UP Based Sugar Stocks, as State Elections in March 22, will see state government raising Sugar cane prices in this Nov/Dec, for crushing season 21-22, while Sugar and Ethanol prices can not get raised, due to surplus Sugar and soft Crude.
4) Chemical Stocks- All Bulk Chemicals Like Caustic Soda, Soda Ash, and other Commodity Chemicals. Even Speciality Chemicals catering to Textiles, Dye & Dye-Intermediates, Benzene based Chemicals and Ethanol based Chemicals, due to rising Raw Material prices.

POSITIVE VIEW-
1) Cement Stocks- Cement is seen a local commodity, catering in 200 km radius, will not see any competition from China. Post Monsoon, from 1-10-21, will see  higher off take, with picing power, so will enjoy bnefits of operating leverage.
2) Non Ferrous Metal- Like   Aluminium, Copper, Zinc, are seen having global demand, with LME inventory seen falling, with good user industry demand in EV, Power Plants, Architecture and Non Corrosion purpose. Positive on Vedanta, Hind Zinc, Hindalco, NALCO.
3) EPC Players- Lower Steel pries will be seen positive for EPC Player and Realty companies, as steel forms a large part of cost. GR Infra, Dilip Buildcon, L&T, NCC, HG Infra, Jain Irrigation.
4) Auto OEM and Ancillary & Consumer Durables Units- Lower Steel price will be seen positive for Maruti, Hero Moto, SSWL, Wheels, Rajratan Global, IFB Ind, Whirlpool. Voltas.

Hence, poison for one person, is seen food of other one.
No meaning in painting all commodity with same brush.

As perfectly reiterated by our editor, Mr.SP Tulsian, “Bear phase never comes in all sectors and all stocks. The view of a sharp correction or weakness in the market is made by people with vested interests. The same media and experts there, wrote off the Indian economy last year in March, when the Nifty fell below 8k.”

This is not a Buy or Sell recommendation, while stock recommendations are provided exclusively to our paid members in the Member Zone.