Strong underlying demand would propel metal space: Rajesh Jain

Rajesh Jain, Market Strategist in an interview to ET NOW said that overall in the entire metal space, ferrous and nonferrous metals, the biggest reason for buying any Indian major player would be the very, very strong underlying demand and we have seen this all through 2009 and also in the beginning of 2010 and all dips would act as excellent buy zones for them.

Do you believe that the uptick in metal space that we are seeing in the last 2-3 weeks, probably even a couple of months could still continue further and would translate into earnings for stocks as well?

The answer is 'yes'. First of all because despite the recent price increase, the Indian steel prices are still lagging the international benchmarks and there is still headroom for a further price increase and that price increase would get absorbed simply because there is a very, very strong underlying demand in the entire Indian space for various steel products, so you should probably erase the word 'froth' and say that there is a very secular up move in the steel business and that's likely to sustain.

Now let's look at the price increase itself, this price increase has been to offset input cost jumps. Now these input costs have gone up typically in iron ore and in case of coal, a lot of the Indian steel producers have captive mines as well as captive coalmines.

Overall in the entire metal space, ferrous and nonferrous metals, the biggest reason for buying any Indian major player would be the very, very strong underlying demand and we have seen this all through 2009 and also in the beginning of 2010 and all dips would act as excellent buy zones for them. Let's also not forget that with the Steel Authority follow-through offer round the corner, I do not expect the sentimental support to the sector to fall off suddenly.