Cement may decline further next week

Cement shares are seen declining further next week in the absence of major triggers, dealers said. Chances of any hike in cement prices remain bleak next week, cement dealers said.

The report of the Monopolies and Restrictive Trade Practices Commission's probe on whether the companies have little control over the prices charged by dealers may be out soon, restraining the companies from hiking prices.

MRTPC has asked cement companies to furnish invoices and other evidence to prove their claim that they had little control over the price charged by dealers from consumers and there was no cartelisation by companies, said an official of a Mumbai-based cement company.

Earlier this week, cement dealers in north India were expecting a cut in prices of up to Rs 4 per 50-kg bag due to slump in demand. The cut in cement price has not taken place as yet. However, prices in the western region are likely to ease between November 15 and first week of December, said Sanjay Ladiwala, president, Bombay Cement Dealers' and Stockists' Association. Some rationalisation in prices among various cement brands can be expected, he added.

Ladiwala expects some consolidation on the pricing front in the western region, as cement makers in the southern region shift some despatches to the western region due to the extended monsoon.

South India, particularly Tamil Nadu, experiences two monsoons""southwest and northeast. While the southwest monsoon withdrew from the country earlier this month, the northeast monsoon recently set in. The wholesale price of cement in Mumbai is currently at Rs 240 a bag, while the retail price is Rs 265.

In north India, the cement price is around Rs 235 a bag, and in south India it is about Rs 255 a bag. In central India, it is around Rs 230 a bag.

October despatches
Growth in cement despatches in October detailed by major companies also remained capped, despite expectation of post-monsoon demand.

ACC reported a 6.7 per cent rise in cement sales for the month from a year ago, at 1.76 million tonnes. The AV Birla Group companies, inclusive of Grasim Industries and UltraTech Cement, posted a mere 0.5 per cent rise in sales in October. Ambuja Cements also reported a 3.6 per cent year-on-year rise in October sales.

The performance stood below analysts' expectation of a 8-9 per cent rise in monthly despatches.

Across India, cement sales growth in September was around 4 per cent, with major cement makers despatches rising 7-8 per cent from a year ago, according to Cement Manufacturers' Association data.

Stock view
Technical analysts expect cement shares to remain subdued next week. Shares of ACC are likely to extend weakness and may find support at Rs 960, an analyst at a foreign brokerage said. He said the shares may move in a range of Rs 960 to Rs 1,118.

The analyst expects shares of Grasim Industries to witness another round of correction. The shares are seen finding support at Rs 3,520 and later at Rs 3,353.

On the upside, Grasim shares are likely to face resistance at Rs 3,875, the analyst said.

Macquarie Research has upgraded its 12-month target on Grasim Industries to Rs 4,520 after it last week reported a 48 per cent year-on-year rise in July-September net profit, at Rs 500 crore.

India Cements is another stock with likely weak movement next week, he said. The stock is likely to find support at Rs 258 and face resistance at Rs 304, he said. The analyst recommended selling UltraTech shares, with a probable upside of up to Rs 1,030. Support for the stock was seen at Rs 936, which if breached, can take it to Rs 852, he said.