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The global steel market is currently facing subdued demand, exerting downward pressure on metal prices. However, the scenario in India remains different, as highlighted in a report by Shriram Mutual Fund.
The report noted that despite various challenges, including the recent elections and the ongoing heatwave, the domestic demand for steel has remained robust. So the demand of the steel remained high even when the demand was muted globally. In fact, the report highlighted that the country has seen a surge in steel imports, which have risen by 67 per cent year-on-year, with the majority of imports coming from China, South Korea, and Japan. "Subdued global steel demand has put pressure on prices. India's stable demand despite election and heatwave impacts, saw steel imports rise 67 per cent YoY, mainly from China, South Korea, and Japan, pushing prices down" said the report. This influx of steel imports into the Indian market has contributed to further price declines, as increased supply pressures prices. On the long term outlook of the metal sector, the report mentioned that the long-term outlook for steel demand in India remains positive, driven primarily by the strong growth in the infrastructure and real estate sectors. These two industries according to the report are expected to continue their expansion in the coming years, supporting sustained demand for steel, even if the short-term global outlook remains challenging. In terms of market performance, the report data highlighted that Nifty Metal Index has shown muted returns over recent months. According to the report, the index posted a negative return of 0.67 per cent over the last month. Over a three-month period, the Nifty Metal Index has declined by 1.47 per cent, though the six-month returns stand at a positive 18.72 per cent. These figures indicate a period of short-term volatility but suggest a longer-term recovery trend. Meanwhile, the report noted that the banking sector is also experiencing slower growth as credit demand continues to rise. This has put pressure on banks to mobilize deposits, leading to higher deposit rates and a potential squeeze on Net Interest Margins (NIM). In this context, the report added that the banks with strong liability franchises and growing market share are better positioned to weather the challenging environment. Investors are advised to focus on these banks as the sector navigates its current difficulties. "Focus should be on banks with strong liability franchises and growing market share, as the sector outlook remains challenging" the report added. (ANI)
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