Citigroup says oversupply in China and Europe leaves little room for upside in steel prices, after global re-stocking sparked a rally over the past three months.

However, the bank retains a 'buy' rating on Tata Steel Ltd and raises its target price to 508 rupees from 430 rupees, citing "inexpensive" valuations, a bottoming out of earnings in Tata Steel Europe and more resilient volumes than other Indian steel makers.

Separately, Morgan Stanley adds Tata Steel to its Asia-Pacific excluding Japan as well as Emerging Markets focus lists, saying the company offers "a good restructuring story" due to rising capacity, improved sales volumes and the commissioning of a new coke oven battery.

Citigroup also downgrades Steel Authority of India Ltd to 'sell' from 'neutral' after the stock gained over 12 percent in past three months, already discounting expectations of margin improvement in fiscal 2014.

Tata Steel shares gain 1.2 percent, while SAIL shares are up 0.4 percent.