InvestorQ : What is the reason that Tata Steel has been one of the best performers in recent months in the stock market?
Dia Deshpande made post

What is the reason that Tata Steel has been one of the best performers in recent months in the stock market?

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swati Bakhda answered.
3 weeks ago
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You are absolutely right. Tata Steel has rallied 128% in the last 6 months and it is up more than 3-fold from the lows of March 2020. Clearly, it has been a star performer and there have been a number of reasons. But some interesting statistics first. Tata Steel market cap crossed Rs.100,000 crore after a very long time of languishing at lower levels. Now it has regained its highest value since June 2008, when the global financial crisis started off.

The big rally in the price of Tata Steel has been driven by a surge in demand for steel as well as robust steel prices. The big boost, of course, came after Moody’s revised its outlook on Tata Steel from “Negative” to “Stable”. This led to an overall re-rating of the stock by most of the institutional brokers and today it is among the top picks of most of the foreign portfolio investors. The turnaround actually for FPIs started with this Moody’s upgrade.

In addition, Tata Steel is also expected to sustain the improvement in its sales growth, profit growth as well as its operational margins consistently over the next 12-18 month time frame. What is more important is that, like a lot of large companies on the Nifty, Tata Steel is also getting debt-averse. It plans to improve its solvency and enhance valuations further with plans to reduce gross debt by $1 billion each year over the next few years.

Apart from an economic recovery from the dumps of FY20 and FY21, the proposed investments in infrastructure which is being planned by the government, are also expected to drive steel demand in India. Tata Steel has also seen a rebound in its operating profit margins or OPMs in the last few quarters. Higher international prices also have the potential to boost exports of steel in the near-term, mainly to contiguous regions.

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