Metal stocks sustain momentum: Hindalco, Tata Steel and JSW Steel surge over 6% for the week

NIFTY Metal emerged as the top-performing sectoral index last week, surging 8.6% on the back of a five-day winning streak and China’s announcement to restructure its steel industry.

Metal stocks, including Vedanta, Jindal Stainless, Hindustan Copper, Tata Steel, Hindustan Zinc, Nalco, Hindalco, and NMDC, gained between 7% and 12%. The rally was fueled by China’s proposed stimulus measures and its commitment to maintaining a 5% growth target, boosting investor sentiment in the metal sector.

The Chinese government has unveiled a 1.3 trillion yuan ($179 billion) economic stimulus package aimed at reviving sluggish consumption. These measures come amid an ongoing trade war with the U.S., which recently imposed a 20% tariff on Chinese imports.

Additionally, China announced plans to restructure its steel industry and curb excessive production. The country has long been producing more steel than its domestic demand requires, leading to the dumping of surplus steel in global markets—including India—at lower prices. This has put Indian steelmakers at a competitive disadvantage. However, with China scaling back production, steel dumping is expected to decline, creating a more favorable environment for Indian steel companies.

Stocks in focus

1. JSW Steel closed above the immediate resistance zone of ₹980 and gave a breakout of the descending channel pattern on the daily chart. It is a bearish price pattern formed by two parallel downward-sloping trendlines, indicating a series of lower highs and lower lows. Traders often look for a break above the upper trendline as a potential reversal signal.

2. Tata Steel reclaimed its 200-day exponential moving average and closed above the crucial support zone last week. The stock surged over 10%, making it one of the top performers in the metal sector. It has now reached its immediate resistance zone of ₹150-₹152 and is consolidating at higher levels. Meanwhile, the immediate support stands around the ₹138 zone.

3. Hindalco Industries formed a strong bullish candle on both the weekly and daily charts, closing above the key resistance zone of ₹679. The stock gained over 8% last week, reclaiming both the 21-week and 50-week exponential moving averages. As seen in the chart below, immediate support is around the ₹630 zone, while resistance lies near ₹714. The next major hurdle is at its previous all-time high of ₹772.

Bullish outlook on Hindalco, JSW Steel, and Tata Steel

If you believe that shares of Hindalco, JSW Steel, and Tata Steel continue their bullish momentum, you can consider a long-call strategy. Let's take JSW Steel as an example. The next expiry for JSW Steel is Thursday 27th March.

On Friday, JSW Steel closed at ₹1,008, making the at-the-money (ATM) strike price 1010. If you buy an ATM call, the breakeven point for this strategy is ₹1,036 - approximately 2.8% above Friday's close. The strategy will be profitable if JSW Steel rises above this level.

Weak outlook on Hindalco, JSW Steel, and Tata Steel

If you expect Hindalco, JSW Steel, and Tata Steel to encounter resistance and see profit-booking after their sharp rally, a long-put strategy could be a viable option. Let’s take Tata Steel as an example.

On Friday, Tata Steel closed at ₹151.5, with the at-the-money (ATM) strike at 151. Purchasing an ATM put of 27th March expiry sets the breakeven at ₹147—approximately 2.8% below Friday’s closing price. The strategy turns profitable if Tata Steel declines beyond this level.

Conclusion

A long-call strategy is ideal for traders looking to profit from upward price movements, while a long-put strategy benefits from market declines. Options trading provides versatility across different market conditions, whether trending up, down, or sideways. However, past performance doesn’t ensure future success. A thorough risk assessment and a well-defined exit strategy are essential before executing any trade.

_Disclaimer Derivatives trading must be done only by traders who fully understand the risks associated with them and strictly apply risk mechanisms like stop-losses. The information is only for educational purposes. We do not recommend any particular stock, securities and strategies for trading. The stock names mentioned in this article are purely for showing how to do analysis. Take your own decision before investing. _