Whalesbook
Tariffs Fuel Steel Rally
The Nifty Metal index rebounded strongly on Friday, March 20, 2026, gaining 2 percent and ending a two-day losing streak. This recovery was driven by heavy buying in steel shares. Tata Steel Ltd. led the advance, rising 4.64 percent to ₹199.40. The rally is linked to changing global trade policies. HSBC raised its 'Buy' rating on Tata Steel and increased its price target to ₹250 from ₹235, predicting a 31 percent potential upside.
This upgrade followed new protective measures, including a 50 percent UK tariff and reduced quotas aimed at protecting its domestic sector. The European Union's planned carbon pricing on imported steel also played a role. Combined with India's safeguard duties from late December 2025, these actions are expected to stabilize domestic prices and boost steel mills' profits for the March 2026 quarter. The steel sector's earnings before interest, taxes, depreciation, and amortization (EBITDA) per tonne are projected to grow significantly.
JSW Steel also saw strong gains, rising 4.85 percent to ₹1186.90. Macquarie named JSW Steel a top pick and maintained an 'Outperform' rating on Tata Steel with a target of ₹222.
Aluminum Faces Pressure Amid Overcapacity
While steel stocks climbed, aluminum shares moved in the opposite direction. National Aluminium Company Ltd (NALCO) shares fell 4 percent on March 20, 2026. This drop followed analyst sentiment, as InCred Equities downgraded both Hindalco Industries and NALCO to 'reduce.' The downgrades cited weak growth prospects and falling aluminum prices.
NALCO's expansion plans are coinciding with softening alumina prices, and earnings for both NALCO and Hindalco are expected to shrink. NALCO has a market capitalization between ₹66,560 and ₹69,241 crore and a P/E ratio of 11.21 as of March 19, 2026. In contrast, large-cap Tata Steel has a trailing twelve-month (TTM) P/E ratio of 25.88, compared to the sector P/E of 23.28, with a market capitalization nearing ₹2.37 trillion. JSW Steel has a large market presence, with forecasts indicating 9.6% annual revenue growth.
Not all steel players benefited equally. Jindal Steel and SAIL also posted gains, but some steel stocks saw declines on March 19, 2026, according to broader market data.
Global Overcapacity Risks Persist
Despite the immediate boost from trade policies, underlying issues in the global steel industry pose significant risks. Steel production capacity is expected to grow for a seventh straight year, reaching an estimated 2.55 billion metric tons by the end of 2025. This could lead to a surplus capacity of about 680 million metric tons.
This oversupply worsens trade friction and lowers prices, leading to more anti-dumping and safeguard measures worldwide. The European Union's Carbon Border Adjustment Mechanism (CBAM) adds costs for Indian steel producers exporting to the EU.
Metal stocks have historically reacted sharply to trade wars. For example, Tata Steel shares fell 7.82% on April 4, 2025, after U.S. tariff announcements. The broader metal sector dropped up to 19% in early April 2025 due to fears of a global trade war. These protectionist policies offer short-term relief but could trigger retaliation and raise global trade tensions, eventually affecting sector demand and profits.
Analyst Views Offer Mixed Outlook
While HSBC is bullish on Tata Steel, the analyst community's view is mixed but leans cautiously optimistic. Macquarie maintains an 'Outperform' rating on Tata Steel with a target of ₹222 and rates JSW Steel as a top pick with a target of ₹1,319.
JM Financial sees Tata Steel and Jindal Steel as top picks, expecting higher EBITDA from domestic price support. However, other outlooks show less agreement. Motilal Oswal set a price target of ₹240 for Tata Steel, citing strong Indian demand but also risks like the EU's CBAM and high competition. Its P/E ratio fluctuates between 27x and 38x.
The World Steel Association forecasts modest global steel demand growth of 1.3% for 2026, driven by infrastructure investments and India's projected 9% annual growth. However, risks from high production costs and geopolitical uncertainties persist. Analyst consensus for JSW Steel shows an average price target of ₹1,255.00, a potential 3.35% upside. Some reports, however, note sell signals from moving averages.