Tisco recovered on Wednesday on bargain hunting by institutions after a battering in recent sessions.

The scrip of India's largest steel manufacturer was up by 0.45% at Rs 145.40 on the BSE by 12:20 IST, recovering from its intra-day low of Rs 142.50. Over 849,000 shares changed hands on the counter.

In 10 sessions, the Tisco scrip shed 9.9% from Rs 158.15 on 19 February 2003 to today's intra-day low of Rs 142.50.

Dealers said the institutional buying was due to the stock's lower valuation after a sustained fall in the last few sessions on geo- political tensions as well as due to the offloading of stocks in the derivatives segment of the bourses.

Players, who had built huge ‘buy' positions in the derivatives segment in February 2003 did not get an opportunity to square off their positions completely by 27 February 2003. Therefore, they carried forward their positions to March 2003. But with the market proving to be lacklustre after the Union Budget 2003-04, players have started offloaded their positions.

As per market buzz, Birla Sun Life was an active seller on the Tisco counter .

However, analysts feel the Tisco stock is a good pick at the current levels following the company's strong fundamentals and expectations of good future growth.

The government's major thrust on infrastructure development in the Budget should hold the company in good stead, by increasing the demand for steel, feel analysts.

As per the Budget, the initial government funding for new infrastructure projects will total Rs 2,000 crore for the year. Principally, investments will be made in railways, airports and sea ports through an innovative funding mechanism.

The Railway Budget has also proved benficial to Tisco, with the cut in freight rates for steel. Freight costs account for nearly 11% of the total cost of production of steel companies, and nearly 50% of their output is transported by rail . Steel companies are expected to save nearly 2.8% in freight costs and 0.32% of the total cost of production. There would also be savings in freight on scrap and iron ore as well, but the savings will differ from company to company depending on the raw material mix and the distance from mines.

The Indian steel sector has witnessed a turnaround over the past year following sustained demand for steel (in both domestic and international markets) coupled with a huge hike in steel prices over the last year. Last month, steel majors effected a hike in flat steel prices by Rs 1,000-1,400 per tonne, the second major price hike in 2003.

For the third quarter ended 31 December 2002, Tisco posted an impressive net profit of Rs 280.23 crore (Rs 2.8 billion) as against Rs 34.54 crore in the corresponding period of the previous year. Net sales rose by 27% to Rs 2,152.69 crore (Rs 21.52 billion) from Rs 1,694.63 crore (Rs 16.94 billion) in DQ 2001.

BSE code: 500470