The brokerage house Motilal Oswal is betting on JSW Steel and Tata Steel as its top picks in the metal sector, even as the industry faces a mixed backdrop of rising steel prices and higher raw material costs.
Domestic steel prices have climbed sharply in recent months, with hot-rolled coil prices reaching a four-year high in September.
Let’s take a look at why the brokerage house is bullish on this stock and the rationale behind it –
The domestic steel market has remained firm during Q2FY27, despite seasonal weakness in demand.
The strength is also visible across different steel products. Rebar prices have recovered to Rs 56,800 per tonne in September from Rs 48,850 per tonne in June. This suggests that the recovery is not limited to one segment of the market.
The brokerage expects this trend to continue, saying, “we remain constructive on domestic steel pricing as we believe the domestic steel cycle is transitioning from volume-led recovery to pricing- and cost-led earnings growth.”
Rising steel prices are being accompanied by higher raw-material costs. Motilal Oswal estimates that every $10-per-tonne increase in coking coal prices adds around $7-8 per tonne to input costs.
The brokerage added, “margin sustainability will depend on mills’ ability to pass through further price increases as the impact of cost inflation will be evident steadily in the coming quarters.”
India produced around 67.4 million tonnes of finished steel between April and August 2026, up 3.7% year-on-year. Finished steel consumption grew at a faster 7.2% to 70.3 million tonnes during the same period. That gap between production and consumption has helped keep the domestic market relatively tight.
The global picture is also supportive. Global crude steel production fell 0.6% year-on-year to around 1.08 billion tonnes during January-July, while China’s production declined 3.1% to about 577 million tonnes.
According to the Motilal Oswal report, the companies that can protect margins in this environment are the ones with stronger cost positions, access to captive raw materials and greater exposure to downstream or value-added products.
Motilal Oswal has given a ‘Buy’ rating to JSW Steel and Tata Steel.
The brokerage expects the immediate earnings outlook to benefit from stronger realisations, particularly if post-monsoon demand improves as expected.
As per the brokerage report, the steel sector could enter the second half of FY27 with a stronger pricing environment than current market expectations.