Nomura backs India steel: 4 Buy calls, FY26 targets

Price momentum keeps steel in focus

Nomura has reiterated a constructive view on India’s steel sector, arguing that domestic conditions are strong enough to limit the damage from global headwinds. In its latest sector note, the brokerage maintained ‘Buy’ recommendations on Tata Steel, JSW Steel, Jindal Steel, and Lloyds Metals & Energy. The report frames the current cycle as led by India’s pricing and demand dynamics rather than overseas developments.

Nomura said global factors, especially China, should have a limited impact on the earnings potential of large Indian steel players. It also highlighted that margins have been expanding, supported mainly by higher steel prices, while input costs have seen only a marginal sequential uptick on a month-on-month basis. For investors tracking the sector, the message is clear: domestic pricing power remains the key variable.

Nomura’s Buy list and target prices

Among listed steel names, Nomura maintained Buy ratings on four companies and published target prices for each. The brokerage cited confidence in their scale, operational flexibility, and cost structures, alongside ongoing capacity expansion plans.

• Tata Steel: Buy, target price ₹220 per share
• JSW Steel: Buy, target price ₹1,340 per share (Nomura also cited ₹1,300 in another note)
• Jindal Steel: Buy, target price ₹1,280 per share
• Lloyds Metals & Energy: Buy, target price ₹1,600 per share

Nomura also reiterated that it expects Indian steel majors to generate higher-than-historical mid-cycle EBITDA per tonne through FY26-28, supported by domestic pricing and policy measures.

Flat steel resilience versus rebar correction

Nomura highlighted a clear divergence between flat and long products in India’s domestic market. It said flat steel prices are holding firm even as rebar continues to correct, indicating relatively stronger momentum in flat products.

The brokerage noted that domestic hot rolled coil (HRC) prices were unchanged week-on-week at ₹58,700 per tonne. In contrast, rebar prices fell ₹900 per tonne week-on-week to ₹56,950 per tonne. With this, the domestic flat-long spread narrowed and turned positive at ₹1,750 per tonne, as HRC resilience outperformed the move in rebar.

Safeguard duty extension and pricing discipline

Nomura linked the recent strength in domestic HRC pricing to policy support, specifically the government’s three-year extension of safeguard duties. According to the brokerage, the extension has helped curb low-priced imports and has structurally improved domestic pricing power.

Nomura said domestic HRC prices have strengthened meaningfully following the safeguard duty extension. It also stated that Q4 FY26 HRC averages rose 12% over the previous quarter’s averages. The firm’s view is that this policy-driven discipline has allowed Indian producers to protect realizations despite an uncertain global pricing backdrop.

Margin expansion: spot economics improve

On profitability, Nomura pointed to expanding margins, led primarily by better steel prices. While input costs have risen, the brokerage described the increase as marginal on a sequential month-on-month basis.

A key data point in the note was the average HRC spot margin in April 2026, which Nomura placed at ₹38,380 per tonne, well above the two-year average. The brokerage used this to support its expectation that domestic strength can cushion India-based producers against global uncertainties.

Why large blast-furnace players look better placed

Nomura differentiated between business models within the sector. It said large, blast-furnace-based steel players are relatively better positioned than smaller and gas-based DRI steel producers.

The brokerage’s reasoning was operational: large players can partially substitute LPG usage with alternatives for downstream operations. This flexibility, along with scale advantages, supports a stronger ability to manage cost volatility and sustain margins when energy and fuel-related inputs fluctuate.

Global risks: China and CBAM remain on the radar

Nomura did not dismiss global risks, but it argued that these are less likely to dominate earnings for major Indian players in the current setup. The brokerage explicitly flagged China-linked uncertainties, including trade policies, as well as Europe’s Carbon Border Adjustment Mechanism (CBAM).

However, the core argument remained that India’s domestic demand and pricing power are providing a buffer. Nomura summarised this view by saying steel is “India’s story” and that global factors, especially China, should have a limited impact on large players’ earnings potential.

Demand outlook: seasonal slowdown, stronger FY27-FY28

Nomura said the recent slowdown in steel consumption in India appears seasonal rather than structural. It expects demand to improve strongly in FY27 and FY28.

The brokerage attributed the expected improvement to multiple drivers: recovery in the automobile sector, expansion of infrastructure projects, growth in manufacturing, and steady demand from end users. In another part of its metals commentary, Nomura said it anticipates a 5-6% year-on-year increase in domestic volumes, even as the industry navigates softer realizations and rising input costs.

Input costs and volumes: coking coal and JSW’s trajectory

Nomura flagged pressure points as well, particularly imported coking coal. It noted that imported coking coal saw a $16 per tonne sequential rise, adding to cost headwinds.

On company-specific volume momentum, Nomura said JSW Steel is expected to deliver a 14% year-on-year increase in consolidated volumes to 7.6 million tonnes (MT), largely driven by its joint ventures. Even with near-term margin pressures, Nomura said it remains constructive on the long-term trajectory given demand and capacity expansion.

Near-term comparison: Q3FY26 caution on Jindal Steel

Nomura also provided a near-term performance comparison for Q3FY26. It said Tata Steel and JSW Steel are likely to perform better than Jindal Steel on a sequential basis.

The brokerage attributed potential relative weakness in Jindal Steel to start-up costs and a weaker product mix, which could drive a sharper decline in EBITDA per tonne on a sequential basis. This view was framed as a quarterly dynamic rather than a change to the longer-term Buy stance.

Key data points at a glance

What investors are watching

Nomura’s note places domestic pricing and demand at the center of the investment case. The three-year safeguard duty extension, firm HRC pricing, and elevated spot margins together form the backbone of the brokerage’s sector view. At the same time, the report acknowledges pressure points like higher imported coking coal costs and the overhang from global policy risks.

The next signposts, based on Nomura’s framing, are how domestic price momentum sustains against rebar weakness, how input costs evolve, and how volumes track as the seasonal slowdown fades. For now, Nomura’s stated stance remains unchanged: Buy-rated large steel names should be better insulated from global volatility than the market often assumes.