The Indian market is on record growth, with benchmark indices hitting new highs through sectors such as IT, metals and oil and gas.

Among Nifty's most profitable stocks, Tata Steel's rise this year has come as a pleasant surprise to investors. Tata Steel shares are up 122 per cent since the beginning of the year, while the Nifty metals index is up 75 per cent. The benchmark Nifty gained 24 per cent over the period.

Such a sharp rise in the stock has raised fears that it is overbought and may soon correct. Stocks have closed in the red for the past two sessions.

With signs of an economic recovery and rising steel prices around the world, the stock has been in a strong position.

Tata Steel's consolidated net profit for the quarter ended June 30, 2021 was 9,768.34 crore. The steel giant posted a net loss of Rs 4,648.13 crore in the same period last year. Total income increased to Rs 53,534.04 crore in the quarter under review from Rs 25,662.43 crore in the corresponding period of the previous year.

Tracking growth. 

Tata Steel is also hoping for a steady path in the coming quarters. The company is targeting capital expenditure of Rs 8,000 crore for the year of its operations in India in the current financial year.

In a presentation to investors on September 6, the company said it intends to reduce total debt by more than $2 billion, giving priority to early repayment of offshore debt in FY22. It is also planning capital expenditure of Rs 10,000-12,000 crore in the current financial year.

Tata Steel's consolidated net debt was down 28 per cent as of March 21 and this is ahead of its debt repayment schedule, said Jitesh Ranawat, head of institutional sales, Marwadi Shares and Finance.

"We expect the company to merge Tata BSL with itself and also accelerate its capital expenditure programme in Kalinganagar, which will give a boost to its capacity in India, which had the highest EBITDA last quarter," Ranawat said, referring to the company's Odisha facility.

The key will be the dynamics of steel prices. Any major correction will provide an opportunity to invest in Tata Steel as the stock has already accounted for a lot of good news at the moment.

"Investors with a six-month outlook should buy on downturns as they can earn over 20 per cent on this if steel prices remain at these levels for another six months. The stock is currently trading at five times its FY22 level," said Ranawat.

Global financial services firm JPMorgan has an "outperformance" on Tata Steel with a target price of Rs 1,810 crore.

"The company reported the highest-ever quarterly EBITDA and PAT despite volumes being hit by the second wave of the pandemic. Tata Steel's debt continued to decline quarter-on-quarter even after a significant increase in working capital," notes JPMorgan.

https://exness1.org/payments/ has learned that global brokerage firm UBS recently backed a "buy" proposal for the stock, while raising its target price to Rs 1,800 from Rs 1,400.

The stock should definitely be a buy candidate on a fall as it has broken out of a huge consolidation with increasing volumes and a clear buy cross in its momentum indicators.

"The short-term momentum indicators are overbought, so some consolidation is possible, which will be very helpful for the stock going forward," said Jay Thakkar, vice president and head of equity research, Marwadi Shares and Finance.

In the short term, resistance will be fixed at Rs 1,535 crore and support at Rs 1,250 crore. "In the long term, one can buy near support levels as metals are in an upward supercycle," Jay Thakkar said.