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Stocks of cement manufacturers are likely to trade in line with the broad market next week amid mixed triggers for the sector. If the broad market corrects, cement counters could lead the fall. Split about the near-term outlook for the sector, with some expecting a correction in stocks due to the prolonged slump in demand for the commodity. But we are of the view that stocks of cement companies will rise steadily in the next few weeks on the anticipated rise in demand. This week, stocks of cement companies rose amid a strong market despite negative triggers for some heavyweights. Stocks of Jaiprakash Associates and India Cements led the pack, rising 7.7% and 3.3%, respectively. However, stocks of Shree Cement and Ambuja Cements declined 2.8% and 2.7%, respectively. Shree Cement's despatches declined 16% sequential in February, and the company's production fell 13% on-month, as per data released on Tuesday. Additionally, there was some negative sentiment for companies such as Shree Cement, ACC, and Ambuja Cements, as their repeated efforts to raise prices in some parts of the country failed.
These companies have been trying to increase prices in Maharashtra, Gujarat and Delhi, but their efforts have failed due to subdued demand. The companies are looking to raise prices by 10-30 rupees per 50-kg bag in the three states, on hopes that demand for the commodity will rise in the coming week. Companies are looking to raise prices also to offset the impact of high input costs, which are going to further rise when the revised freight rates come into effect on Apr 1. On Feb 26, the government announced a fuel-linked price adjustment in freight rates in the Railway Budget for 2013-14 (Apr-Mar). This is likely to increase cement freight rates by about 5.8% from Apr 1.
