Yesterday, shares of Tata Steel fell more than 12%, reaching a 52-week low of Rs 1,003.
The Tata Steel share price has experienced volatility in 2022. The share price was falling at the beginning of the year.
However, the scenario changed in March 2022 when Tata Steel’s stock flipped and rose.
But this didn’t last long. Shares of the steel giant started falling again in May.
Yesterday, shares of Tata Steel fell more than 12%, reaching a 52-week low of Rs 1,003.
Also today, the stock has fallen marginally and is trading near its 52-week low.
But what caused the sharp drop yesterday? What suddenly changed that pushed Tata Steel’s stock down?
Read on to find out…
Changes in the steel sector
Over the weekend, May 21, 2022, Finance Minister Nirmala Sitharaman made changes to the customs duties on steel.
The ministry reported export duties on as many as 11 iron and steel intermediaries and lowered import duties on 3 commodities.
According to the notification, the export levy on one item has been increased, while ten fresh items are introduced into the tax network.
These changes are being made to ensure the local availability of steel in India.
For example, domestic steel prices will fall as exports are discouraged. This will have an impact on the share prices of the steel sector.
Tax rate and share price are inversely proportional to each other. So when a tax on a commodity is increased, the stock price of the producing company will fall.
This happened with the share price of Tata Steel. Due to the increase in excise duties announced on Saturday, the share price fell rapidly on Monday.
Shares of Tata Steel opened yesterday at Rs 1,095.1, which is 6% lower compared to the previous closing price.
Within minutes of the market opening, the company’s stock expanded its losses. It ended up more than 12% lower yesterday.
Tata Steels has had a huge impact from the increase in export duties as 15-20% of Tata Steel’s turnover comes from steel exports.
How did other metal stocks perform?
A small pebble is enough to make a weak cart fall. The cart of metal supplies was already weak.
Note that metal stocks have been under a lot of pressure lately. The metals sector has already faced problems such as China’s economic slowdown, change in steel demand, etc.
For more information, read our main article on why metal stocks are falling.
Meanwhile, chartist Brijesh Bhatia shared his thoughts on metal stocks and whether the rally in metals stocks is over today.
You can read it here: Metal stocks are starting on a rusty note. Is the rally over?
The cart was already moving with difficulty. But the stone of export duties caused the steel sector to collapse.
What the future of Tata Steel looks like…
Despite the unfavorable situation in the steel sector, Tata Steel’s financial statements paint a rosy picture.
In the 2021-2022 fiscal year, Tata Steel’s revenue is up approximately 54% from the prior year.
For the full fiscal year 2021-22, Tata Steel reported good results. Net profit rose to Rs 41,750 crore. This is a more than fivefold jump from last year’s net profit of Rs 8,190 crore.
Tata Steel became the most profitable company of the Tata group, surpassing Tata Consultancy Services (TCS) after several years, aided by rising steel prices due to the commodity supercycle.
Tata Steel’s share price may therefore fall due to market conditions, but the financial data is very healthy. This indicates a positive sign for long-term investors.
However, investors should be very careful. The markets are constantly changing. These changes have a major impact.
Investors should keep themselves informed of any changes.
For more information on Tata Steel, view Tata Steel’s financial factsheet and latest quarterly results.
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
This article is from Equitymaster.com
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)
