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Budget 2010-11: Steel


The steel sector has witnessed a roller coaster ride of late wherein it has witnessed a significant spurt in demand due to expanding oil and gas sector, large infrastructure spending coupled with growth in housing, consumer durables and auto sectors. However, it has also experienced a fall in steel prices on account of the global financial crisis. Infact, difficult times prevailed even on the demand front until the Reserve Bank of India and the Central government announced various monitory & fiscal initiatives and thus, the demand once again started picking up recently. Currently, with the government's increased emphasis on infrastructure, we believe the sector is poised for significant growth over the medium to long term. As a matter of fact, India's per capita steel consumption continues to be low at 46 kg as against the global average of 198 kg. Thus, this further strengthens our belief that the potential ahead for India to raise its steel consumption is high..

 Budget Measures


  • Higher allocation towards urban development and housing.
  • Higher allocation towards road development programme such as the NHAI and rural infrastructure.
  • The process of disinvestment is on for National Mineral Development Corporation.
  • Surcharge on domestic companies reduced to 7.5% from 10%
  • Increase in the rate of Minimum Alternate Tax from 15% to 18% of book profits

     Budget Impact


  • Increased focus on infrastructure development would result in development of highways, ports, bridges etc, which will consequently increase the demand for steel.
  • Increased spending on urban development and housing will result in higher steel consumption.
  • Increase in tax slabs for citizens would result in higher disposable income that will likely trigger increased demand for consumer durables, white goods etc, thus eventually boosting the demand for steel.

     Company Impact


  • Increase in spending on infrastructure to be beneficial to major steel players like SAIL, Tata Steel and JSW Steel who account for bulk of the total steel production capacity in India.
  • Increased spending on urban and rural development schemes, especially housing and other infrastructure is likely to increase the demand for long steel products, a positive for companies like SAIL and Tata Steel, which have a large dealer network spread across the country.
  • Increase in demand for auto and consumer durables will result in rise in consumption of flat steel products, thus companies like Tata Steel, JSW Steel and SAIL are poised to seize the opportunity here.

    Budget Impact: Steel Sector Analysis for 2009  | Steel Sector Analysis for 2011
    Latest: Performance Of Steel Stocks | Steel Sector Report


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    Sector Performance
    COMPANY PRICE (Rs)
    ADHUNIK METALIKS 2.2
    (-0.5%)
    JINDAL SAW LTD 86.4
    (4.7%)
    JINDAL STEEL & POWER 161.0
    (5.9%)
    JSW STEEL 287.7
    (4.2%)
    MAHARASHTRA SEAMLESS 457.4
    (1.5%)
    SAIL 51.6
    (5.2%)
    TATA SPONGE 712.5
    (1.5%)
    TATA STEEL 483.5
    (3.8%)
    TATA STEEL 2% CCPS 262.2
    (-0.9%)
    TATA STEEL BSL 30.4
    (3.6%)
    TAYO ROLLS 39.9
    (1.4%)