Indian steel stocks seen outperforming despite monsoon weakness

Investing.com -- Morgan Stanley expects Indian steel stocks to continue outperforming over the coming months despite anticipated near-term price weakness during the monsoon season.

Steel stocks have risen approximately 15% year-to-date, while the Sensex has declined around 11%. The investment bank maintains a constructive outlook on steel spreads over the medium term, supported by government intervention, favorable demand prospects, and China's anti-involution measures.

Hot-rolled coil prices remained stable week-over-week at Rs57,800 per ton, representing a 26% increase from mid-December lows. Rebar prices weakened approximately 3% during the week to Rs45,900 per ton, up 8% from mid-December levels.

Domestic HRC prices currently trade at a 9% discount to import parity prices when including the safeguard duty. The government's imposition of the safeguard duty has provided support for domestic steel prices and driven spread expansion.

April saw increased steel imports, leading to inventory restocking as reflected in Joint Plant Committee data. Morgan Stanley anticipates the restocking cycle will persist as the monsoon season approaches and production increases following recent capacity additions.

China CFR iron ore prices for 61% Fe content fell roughly 4% during the week to $110 per ton. Domestic prices are trading at a 54% discount versus parity, compared to a five-year average of 56%.

Australian hard coking coal prices held steady at approximately $241 per ton, up 4% month-over-month. Domestic spreads contracted around 1% during the week but remain up approximately 27% from mid-December lows, though down 11% from the April 2026 peak.

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