While discussing recent earnings from JSW Steel, Tata Steel and Steel Authority of India (SAIL), he added that “new position is not recommended at this level” as the sector is trading closer to peak profitability.
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Arora said investors holding steel stocks may continue with existing positions for limited upside, but should remain careful as consensus target prices have not moved significantly higher after earnings upgrades.
He maintained that JSW Steel remains one of the preferred names in the sector due to its capacity expansion plans and cost efficiencies. However, he cautioned that margins could soften after the current quarter.
Arora said Tata Steel’s European operations are no longer a major driver of value because domestic capacity expansion has become more significant. He noted that sustainable improvement in Europe may remain difficult until operations move away from older blast furnace-based production.
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He has turned cautious in the aluminium space and recommended profit booking after the recent rally. “Aluminium definitely is trading way beyond its fair value,” he said, adding that prices are currently around $3,600 per tonne against his estimated fair value of about $2,600.
He warned that additional supply from Indonesia and planned capacity additions by Chinese producers could pressure prices over the medium term.
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Arora also highlighted macro support for metals from a weaker US dollar, which improves realisations for commodity producers globally. He said AI-linked demand has become a major driver for base metals, particularly copper, and future investment trends in AI infrastructure could influence commodity prices going forward.
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