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Cement shares slip as markets expect poor quarterly results

UltraTech Cement, Ambuja Cements and JK Cement, lost 6.7% each

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fell between one and four per cent on Thursday, amid anticipation of poor October-December quarterly performance. Moreover, government plans regarding raising diesel prices have further dented sentiments in the cement counters.

After a steep rise against all odds in the previous year, cement stocks witnessed sharp decline in the past few trading sessions. For instance, this week alone when the benchmark indices lost around 0.6 per cent; the country’s largest cement manufacturer UltraTech Cement, Holcim-owned and northern major JK Cement, lost 6.7 per cent each.

However, took the hardest hit as its shares witnessed the steepest decline of 11.7 per cent in last few trading sessions. It fell from Rs 160.95 last Friday to Rs 142.05. According to the research head of a Mumbai-based brokerage firm, the market is anticipating poor quarterly show as cement prices remained subdued for a major part of the quarter. Also, during November-December, all-India average price of a 50-kg bag slipped 10 per cent from Rs 300 a bag to Rs 270.

LACKING CONCRETE STRENGHT
Sharp fall in cement stocks so far this week             (in Rs)
Company Closing price on Jan 10 Change* (%)
JK Lakshmi 142.05 -11.75
Ambuja 192.10 -6.71
JK Cement 318.40 -6.70
UltraTech 1,900.10 -6.68
India Cements 87.20 -4.70
ACC 1,379.15 -3.78
Shree Cement 4,461.15 -2.73
Grasim 3,127.80 -1.72
Madras Cements 238.75 -0.44
* Change over last week's closing price, All figures in Rs/share
Source : BSE

The price of the building commodity has always been the deciding factor for the sector’s profitability. The December quarter sees the beginning of the peak construction season, which pushes up prices. However, this time around, lack of construction activity did not augur well for the industry and the winter season further worsened the scenario.

Sector analysts say large-cap cement stocks may see a further decline of three-five per cent, while mid-cap stocks are likely to see another five-eight per cent fall before bouncing back. Post mid-January, experts expect a surge in cement prices which would prove beneficial for cement makers in the current quarter.

Indian cement market, where majority of the global majors have reasonable presence, is the world’s second-largest after China. Currently, the overall capacity of the sector stands around 330 million tonnes. Top players control close to half of the markets while rest is dominated by small and regional players.

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