The rise was fuelled by price hike in the South.
Cement stocks have again started showing signs of weakening after the recent short-lived rally due to the unexpected price increase in the south.
Since then, these shares have been declining despite the fact that stock exchanges’ benchmark indices have closed strong on all last seven trading days.
For instance, shares of ACC, which had almost reached a 52-week high at Rs 1,016, closed at Rs 959.80, down 1.1 per cent. Similarly, UltraTech closed at Rs 1,023, down 1.7 per cent from its recent high of Rs 1,081. The Bombay Stock Exchange's benchmark Sensex was up 155.15 points, or 0.8 per cent, while the CNX Nifty closed 1.1 per cent up, or 65.4 points.
Industry experts said the rally in cement stocks was mainly triggered by a Rs 25-30 per bag rise in cement prices. “This price hike did not happen due to a mismatch in supply and demand. Rather, it was an artificial attempt by the companies to avoid negative profitability,” said an industry analyst at a domestic brokerage firm. She added there were low chances of sustaining such high rates.
Analysts said a sharp decline in realisations per tonne and expectations of negative returns at Ebitda (earnings before interest, taxes, depreciation and amortisation) per tonne for those having exposure in the southern market might restore normalcy in cement stocks sooner or later.
| SHORT-LIVED GAINS Showing cement majors' stock movement on Wednesday | ||
| Company | Closing price | Change % |
| ACC | 959.80 | -1.14 |
| UltraTech | 1023.00 | -1.69 |
| India Cements | 110.15 | -1.56 |
| Binani Cement | 80.30 | -1.59 |
| Andhra Cements | 20.05 | -2.20 |
| JK Cement | 166.00 | -0.15 |
| Jaiprakash Associates | 124.95 | -1.03 |
| Source: Bombay Stock Exchange All figures in '/share | ||
Shares of India Cements, a dominant player in the south, had risen to Rs 118.55 last week. On Wednesday, however, the shares closed at Rs 110.15, down 1.6 per cent. Andhra Cements, another southern company, was not an exception, as its shares traded at Rs 20.05, down 2.2 per cent.
India Infoline, in a note on the sector, said, “Recent discipline (by hiking prices) would be tough to sustain, owing to low capacity utilisation and likely stabilisation of new entrants’ plants in the coming quarter.”
Cement prices in the northern markets have been stable, while there are expectations that the southern market may see another rise in prices, as companies in the region are planning production cuts to reduce losses.
