He advises investors to stay away from the metal space and says the sector will witness pain for a prolonged period. "I would prefer to be out of the metal sector for now because I don't think we have still seen the worst of the pain and it will be for an elongated period."
In the last one week metal stocks have fallen over 10 per cent.
The situation will be the same across names in the sector, he said.
"In a situation where demand is weak, you have excess supply, prices are falling, it means there will be negative operating leverage for most of the players," Mr Jain said.
"The larger players are the ones who will be in a good position to basically survive and go through this pain period," he added.
Many companies from the metal space are going to report "bad" earnings, Mr Jain said. Morningstar advises investors to look at other sectors which will offer higher returns, better growth opportunities and stay away from the metal space.
However, one company in the metal sector that Morningstar is bullish on is Coal India.
"We still believe Coal India is the one which stands apart which is best in class in terms of Indian metal basket. If investors want to take interest particularly in the metal sector, Coal India is the one which still at such low international prices is going to offer you 40 per cent plus returns invested in capital," Mr Jain said.
Another prominent stock in the space Tata Steel is likely to further slide as are other stocks from the space, he said.
The very worst downside from here for Tata Steel would be 10-15 per cent more, Mr Jain said.
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