Cement stocks took a beating on the bourses across the country today following a dip in cement prices in the Mumbai markets. In fact, they were partially responsible for dragging down the BSE Sensex today, by half a per cent or nearly 18 points.
Sentiments at major cement counters such as L&T, ACC, Gujarat Ambuja Cement and Grasim were bearish throughout the day after the news that prices in Mumbai were down by more than nine per cent. Market analysts apprehended that other regional cement markets might take a cue from the price cut in Mumbai.
The worst hit was L&T, which closed at Rs 201.75, 4.5 per cent down from the overnight closing. It lost 4.21 per cent on the NSE where the stock price went down to Rs 202.65.
On the BSE, the ACC scrip closed at Rs 141.50, 3.71 per cent lower than the previous closing of Rs 147.10. The share lost 3.74 per cent, at Rs 141.60 from Rs 147.10 on the NSE.
The Grasim scrip fell 0.44 per cent on the BSE and 0.30 per cent NSE. It closed at 284.95 (Rs 286.20) and Rs 285.35 (Rs 286.33) on BSE and NSE respectively.
Gujarat Ambuja, however, managed to hold the price at the overnight closing of Rs 159.95 on BSE and Rs 160 on NSE today.
The news that retail price of a 50 kg cement bag was down from Rs 65 to Rs 50 dragged down the counters further below their closing level. However, all managed to register some improvement before closing. For instance, L&T touched intra-day lows of Rs 201.75; ACC of Rs 140.25, GACL Rs 158.05 and Grasim Rs 284.10 on the BSE.
Analysts said the cement counters, barring L&T, were facing resistance at the market prices over the past two weeks. Today's report of reduction in cement prices actually acted as a trigger point for the slide, they added.
The resistance was despite the positive news from Cement Manufacturers' Association (CMA) that cement demand was expected to grow 7-8% this fiscal. The CMA had based its forecast on a fairly satisfactory monsoon and government initiatives in infrastructure and roads.
A city-based technical analyst said all the cement stocks were, by nature, underperformers on stock markets because of the basic vulnerability of product prices and fragmented markets.
He said even the post-reduction cement prices might not be sustainable. "Earnings of the cement companies might be under pressure in the days to come," he added.
