International rating agency Fitch said on Wednesday taht it expects to see increased investor interest in the Indian steel industry with steady balance sheet correction - a major issue confronting the sector.

"The Indian steel industry reaped benefits of improved pricing and worldwide demand growth during FY03 with most of the participants reporting substantial improvement in profitability and overall financial position. This trend has continued during the first nine months of the current fiscal too", Fitch Ratings director R Jayakumar said in the report released in Mumbai.

The outlook on the sector was primarily driven by the trend in the global steel sector. However, considering the seven per cent growth estimated during the current and the next year, Fitch expects the Indian steel sector to fare better than its counterparts in other countries, it said.

This is based on assumptions regarding growth of the construction and infrastructure sectors, it added.

Fitch, which believed that fundamentals of the steel sector are improving, said the industry enjoys inherent advantages in terms of availability of raw material and cheap labour.

Fitch said operating margins of integrated manufacturers -- Tata Steel, Steel Authority of India and Rashtriya Ispat Nigam Ltd -- registered improvements during FY-03 on account of higher capacity utilisation and better control on raw materials.

Strong demand from alternate markets, particularly China, helped absorb some of the additional global capacity on account of lower exports to the US, benefiting most steel producers worldwide through better pricing and higher capacity utilisation, the rating agency said.