Analysts believe a favourable steel cycle and Europe being in sweet spot will complement the twin focus on growth and debt reduction of Tata Steel. It reduced debt by Rs20,000 crore in the March quarter
MUMBAI: Tata Steel is expected to receive an aggregate inflow of $126 million after the stock is included in the BSE Sensex index after a gap of six months, according to estimates made by Abhilash Pagaria, analyst, Edelweiss Alternative Research. As part of a rejig, Tata Steel will be included in the 30-share index replacing Oil and Natural Gas Corporation (ONGC) from 21 June.
“Tata Steel will see inflow of approximately $126 million and ONGC will see outflow of $60 million," Pagaria said. Tata Steel was a constituent of Sensex until December when it was replaced by Dr Reddy’s.
Tata Steel has been one of the biggest beneficiaries of the robust rally in metal prices over the last few months So far this year, the Tata Steel stock has gained 73%, adding 8% in May. This follows a jump of 36% in 2020. The BSE Metal index has soared 60% this year, becoming one the biggest sectoral gainer. Metal stocks have rallied driven by rising metal prices, resulting in strong earnings growth and faster deleveraging.
Analysts believe a favourable steel cycle and Europe being in sweet spot will complement the twin focus on growth and debt reduction of Tata Steel. It reduced debt by Rs20,000 crore in the March quarter.
Shares of ONGC, on the other hand, have seen a far lower increase in its prices. ONGC gained 4% in May, having advanced 21% in the year so far. In 2020, the stock shed 28%.
Asia Index Private Ltd, which is a joint venture between S&P Dow Jones Indices LLC and BSE Ltd, has also made changes in few other indices. In the BSE Bankex, RBL Bank will be replaced by AU Small Finance Bank. In both BSE 100 and Sensex Next 50 indices, AU Small Finance Bank Ltd, Adani Enterprises Ltd and Cholamandalam Investment & Finance Co. Ltd. will be added, replacing Bosch Ltd, LIC Housing Finance Ltd, and TVS Motor Co Ltd.