Metal stocks are having a good run in the markets and steel is one segment that has been showing good movement. In this exclusive research, Zee Business’ Senior Research Analyst Varun Dubey tells Managing Editor Anil Singhvi which two stocks will have a good run going forward. He tells the outlook for these two stocks and why investors should keep an eye on them. 

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Dubey said that Tata Steel and SAIL are the two stocks that will bring handsome returns for the investors. 

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Stocks to Buy – Tata Steel – He said that there is an upside of at least 10 per cent in the Tata Steel stocks from the current levels. This stock was trading at Rs 912.80 at the time of the recommendation. 

Stocks to Buy – SAIL – Dubey said that the upside for SAIL shares is between 20 and 25 per cent.  

He said that the bull run in steel begins when China becomes the net importer of steel. China accounts for 50-56 per cent production of steel. In 2008, China began a net importer, and the steel stocks had a tremendous run during that time, he said. It became a net importer even in 2020 almost after 11 years. This is the reason why steel stocks are seeing the major upside.  

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The Senior Research analyst said that both Tata Steel and SAIL have captive mines for iron ore. Maximum iron ore used by them is from their captive mines. These two companies also have captive mines of coking coal as well, he further said. 

The iron ore prices have appreciated by Rs 3,600 per tn since June 2020, but the prices of steel have gone up by over 19,000 per ton. 

Since the companies already have captive mines, they are likely to enjoy an edge over the peers. 

Seconding Dubey’s analysis the Managing Editor said that having captive mines will help Tata Steel and SAIL. The margins will improve significantly.  

Another indicator of the bull run will be when the Foreign Institutional Investors start investing in these companies, Dubey further said.