Tata Steel share price is soaring: is it a good stock to buy?

Tata Steel share price rose sharply on Monday, becoming one of the best-performing companies in the Nifty 50 index. It soared by over 5.60% even though the company made no news during the session. It has jumped by more than 87% from its lowest point in 2022 and is hovering near its all-time high of INR 159.10.

Tata Steel is doing well

Tata Steel, the biggest steel company in India, is doing well, helped by the strong domestic and international markets. 

This performance is happening at a time when the global economy is seeing uneven recovery. Most importantly, China’s steel mills are still pumping millions of tons, which has affected steel prices. In 2023, the country shipped between 7M and 8M tons of steel per month. 

Despite this, Tata Steel’s domestic deliveries in the last quarter stood at over 4.78 million tons a 10% increase from the same period in 2022. This growth was mostly because of the strength of the automotive industry.

In all, the company’s revenue for the quarter came in at Rs 55,312 crores while its EBITDA was 6,334 crores. Its operation and EBITDA margins also improved slightly during the quarter as the company slashed costs.

Tata Steel stock price has also rallied after the company announced plans to close its Port Talbot operations in 2023. It will shatter its operations but also invest in an alternative low-carbon plant in the coming years. The company plans to save millions of dollars every year.

A likely reason why Tata Steel shares surged is that China published encouraging industrial production data. Production rose by 7% in February after growing by 6.8% in the previous month. This increase was better than the median estimate of 5.3%.

Tata Steel does not have major operations in China. Nonetheless, the figure showed that the Chinese economy was doing well, which is a good barometer for global growth. 

In line with this, iron ore prices have continued falling in the past few weeks, with a ton going for less than $100. Tata Steel and other steel companies do well when iron ore price is falling since it is the main raw material for steel. 

Additionally, the Indian government plans to continue spending this year ahead of the upcoming general election. While the spending growth is expected to slow down, it will remain at an elevated level. 

Tata Steel share price forecast

TATA chart by TradingView

The daily chart shows that the Tata Steel stock price has been in a strong uptrend in the past few months. It has formed an ascending channel shown in green. The current rebound happened after the shares dropped to the lower side of the channel and also formed a hammer candlestick.

The shares have also moved slightly above the 50-day and 25-day Exponential Moving Averages, a potential bullish sign. 

Therefore, the shares have some more upside, with the next price target to watch being at INR 156, the upper side of the channel. A break above that price will lead to more upside as bulls target the psychological point at INR 160.

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