Moreover, the thrust on new projects like dedicated freight corridor in Railway Budget 2013 is likely to boost steel consumption as Railways are one of the biggest consumers of steel in the country.
The Rail Budget has a 20% higher plan outlay of Rs.63,360 crores in FY14, over this year estimated, which augurs well in enhancing the railway infrastructure, which is need of the hour. For the steel and mining industry, the last mile connectivity planned for some ports and mines will facilitate the competitiveness of the industry. The investment planned by Indian Railways in the 12th Five Year Plan of Rs one lac crore, through the public-private partnership (PPP) mode is eagerly awaited by the steel industry. The thrust of the rail budget on new projects like DFCC, new coach manufacturing plants, up-gradation of stations, doubling of lines/ gauge conversion will boost steel consumption as Railways are one of the largest consumers of steel in the country.
Therefore, an increased investment by Indian Railways will spur steel consumption at a time, when large capacities for steel are being installed by SAIL, which shall be beneficial to the company.
Buy at the CMP of Rs.70.45, for a price target of Rs.81-86, which I think will be achieved within this week.