Tata Steel shares trade below Rs 100 level for fourth session, more downside likely?

Shares of Tata Steel were trading below Rs 100 for the fourth consecutive session today. The steel stock has been correcting recently amid continued volatility as fears of a recession have rocked the domestic market for the past six sessions. Tata Steel shares, which closed at Rs 104.25 on September 23, fell to Rs 95.25 on September 28, losing 8.6% over the period. Tata Group stock dropped from the Rs 100 level, closing at Rs 99.85 in the very next session. The steel leader has been facing headwinds for a long time.

The recent correction due to the weakness of the global indices stimulated the sale of the title. An economic downturn for the global economy recovering from the coronavirus blues will cause construction and related activities to plummet, hitting demand for inputs such as steel, among other components.

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Metals stocks such as Tata Steel have long been under pressure as the ongoing Russian-Ukrainian war and uncertain demand outlook from China undermined investor sentiment. The steel sector in China is facing challenges related to weaker than expected demand from the real estate sector. Restrictions related to the Covid-19 pandemic also continue to disrupt construction activities.

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On September 22, the board of directors of Tata Steel authorized the merger of its seven subsidiaries with itself. Tata Steel Long Products, Tata Metaliks, The Tinplate Company of India, TRF, Indian Steel & Wire Products, Tata Steel Mining and S&T Mining are the companies that will be merged with the parent company. The development, however, positive failed to enthuse the stock.

The stock rose 1.73% today to Rs 96.90 as the domestic market rallied after six sessions in line with positive global signals. Tata Steel's share price rose after falling for three consecutive sessions. Tata Steel shares are trading below the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

Large-cap stocks are down 25% in one year and down 13% in 2022. Tata Steel shares are down 33.28% from their 52-week high of 142.62 rupees reached on October 19, 2021 .

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The Tata Group company announced a 21% drop in its consolidated net profit in the first quarter of the current financial year. The large steel company recorded a consolidated net profit of Rs 7,714 crore for the quarter ended June 30, 2022 compared to Rs 9,768 crore in the corresponding quarter of FY22.

Here's a look at what market experts have been saying about the current weakness and how to approach the Tata Group stock.

Punish Patni, Equity research analyst Swastika Investmart said: "Tata Steel stock is under pressure due to cooling steel prices, subdued global demand due to rate hike regime by global central banks and export duties imposed by the Indian government, which will create a supply glut in domestic markets. because of optimistic long-term demand outlook, competitive advantages of Indian steelmakers like low labor and iron ore cost and reduction of steel production by China.Additionally, the energy crisis in Europe may prove to be a boon for Indian steelmakers provided the government removes export duties.

Abhijet of Tips2trade said: "A global collapse, particularly in the US and Europe, has triggered panic selling in global indices, with metal stocks including Tata Steel bearing the brunt. Rs 94 will be support immediately with very strong support at Rs 90.5. Until Tata Steel does not close above Rs 101 on the daily charts, investors should avoid buying."

Tirthankar Das Technical and Derivatives Analyst, Retail, Ashika Stock Broking said: "The volume trend has shown an accumulation at Tata Steel over the past few months, indicating heightened enthusiasm to push prices higher as the latter lacks participation in volume. Tata Steel can be expected to see a strong upside move towards Rs 140-Rs 150 from a medium to long-term perspective (gauging the involvement of the downsloping bullish channel)."

Ravi Singh Vice President and Head of Research at Share India, said, "Weak international prices and weak demand have pushed down domestic steel prices. Tata Steel is in expansion mode and requires significant capital. The cost of financing can also be negatively affected. by rising interest rates. The current volatility of the rupee also works against the dependence on imports and the company's offshore business. However, Tata Steel's strong cash flow, thanks to strong operating performance, suggests its future prospects. The stock may witness lower buy levels for the short-term Rs 100 target and Rs 107 long-term target.