We last took a look at TATASTEEL [stockquote]TATASTEEL[/stockquote] in October last year. We were waiting for a decisive breakout above the (down) trend-line before getting bullish on the stock. It made a 52 week low of Rs. 320 last Friday.
As you can see from the chart, the stock has tested the Rs. 320 levels twice before since 2009 and has bounced back each time. From a valuation point of view, it is trading at a PE of ~8 which is on par with its global peers like US Steel and Arcelor Mittal. Plus, the Tatas have been giving a Rs. 12 per share dividend since 2011. However, the global outlook for the metal is bearish, with European steel demand being down by 30%, and the industry remains highly fragmented.
So the question is will TATASTEEL be a good buy at today’s levels? The RSI indicator is at neutral and MACD is bearish. So from a technical point of view, it is a short-term sell. From a long-term perspective, it is trading at valuations that might be a good entry point for investors who can stomach volatility. If the stock closes above Rs. 320 levels today, it is a long-term buy from our point of view.