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Steel, cement sectors back with a vengeance

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Nesil Staney Mumbai
Last Updated : Jun 14 2013 | 4:08 PM IST
Share prices of steel and cement companies are soaring on the bourses owing to favourable demand-supply equation in both domestic and international markets.
 
Apart from the pick-up in infrastructure activity domestically, heavy construction activities happening in the Middle East and China should mean more demand, firm commodity prices and better corporate profitability in the coming quarters, analysts said.
 
Several small and large cement and steel stocks have witnessed hikes in their stock prices in the past couple of months. From the beginning of June to mid-August, major steel stocks posted an average appreciation of over 50 per cent while frontline cement scrips gained more than 25 per cent. During the same period, the BSE Sensex has moved up 17 per cent, from 6730 to 7860.
 
Six scrips in the steel sector posted more than 100 per cent returns. The biggest gainer was Ghaziabad-based steel manufacturer Rathi Udyog that appreciated a staggering 327 per cent with its stock price surging from Rs 46 on June 1 to Rs 195 in mid-August.
 
Earlier this month, Rathi Udyog had announced plans to enhance its capacity. The company had also signed an MoU with the Orissa government for setting up a steel plant in the state.
 
Shares of the government-owned company and largest steel-maker in the country, Steel Authority of India, were up 25 per cent. The second largest steel producer, Tata Steel, gained in line with the market, as its stock price hovers around Rs 415, up 16 per cent from the June level.
 
Other prominent gainers were Jindal Steel & Power (up 30 per cent from Rs 906 to Rs 1174), Maharashtra Seamless (26 per cent to 467.30), Steel Strips Wheels (35 per cent to Rs 160.35), Jindal Stainless (29 per cent to Rs 126.25) and PSL Steel (17.5 per cent to Rs 178.60).
 
According to V V L N Shastri, country head, Firstcall India Equity Advisors, many FIIs, particularly the hedge funds from the Asia-Pacific region, are eyeing steel scrips.
 
"There is a vast demand for these commodities from the global infrastructure markets. In the absence of required supplies, there is a foaming trend that is leading to higher export avenues. This, in turn, is attracting stock market investments in these sectors," Shastri said.
 
Major gainers in the cement block were Sree Digvijay Cement (up over 55 per cent to Rs 120.75), followed by Rain Commodities (54 per cent), Sagar Cements (47 per cent), Jaiprakash Associates (40 per cent), Dalmia Cement (32 per cent) and Shree cement (26 per cent). The big players were not left behind in rally. UltraTech was up 28 per cent while ACC appreciated over 21 per cent. The Gujarat Ambuja Cement stock gained a meagre 8 per cent to Rs 65.
 
Vikram Kotak, president, Techno Shares & Stocks, said, "The global demand "" vastly from the Middle East "" is pulling the scrips. The demand for steel and cement is expected to last for a longer period, as the Middle East is spending the surplus oil money heavily on its infrastructure. The high demand from China was also unexpected and came as a bonus to the existing global demand. In fact, share prices of steel companies had gone down during the first quarter, so now they are bouncing back."

 

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First Published: Aug 19 2005 | 12:00 AM IST

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