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Stocks of major cement companies are seen tracking the street, which is seen keeping a hawk's eye on measures by the Reserve Bank of India to perk up the weakening rupee. To contain the fall in the Indian currency, the RBI yesterday announced it will auction 220 bln rupees of cash management bills every Monday. Investors have a negative bias on industry's stocks on concerns that short-term lending rates will rise as a result of tight liquidity. Rise in lending rates will affect the demand for cement as infrastructure and housing activity may slow down. However, the bantering on cement sector stocks will not be much as it has already bottomed out. The downward slide for cement stocks will continue because of the subdued demand outlook for cement in the near term as the monsoon is in full swing. Prices of the construction materials are also under pressure during the monsoon months.
While the industry managed to hike prices in May '13 (thereby reversing the loss/declines in Apr 2013), the monsoon season will lead to price declines across regions, excluding south. The stocks of cement companies are likely to trade with a negative bias also due to gloomy outlook by the industry players on margins and order inflow. Investors are seen preferring UltraTech stocks as the company is better-placed in terms of market presence, capital expenditure and expansion plans. However, see earnings of cement companies recovering sharply post October on account of improvement in prices and demand. We see prices firming up after the monsoons. We believe that near-term weakness in cement stocks can be used as opportunity by long-term investors to increase their holdings. We had expected demand to pick up after September on hopes of an increase in
Stocks of major cement companies are seen tracking the street, which is seen keeping a hawk's eye on measures by the Reserve Bank of India to perk up the weakening rupee. To contain the fall in the Indian currency, the RBI yesterday announced it will auction 220 bln rupees of cash management bills every Monday. Investors have a negative bias on industry's stocks on concerns that short-term lending rates will rise as a result of tight liquidity. Rise in lending rates will affect the demand for cement as infrastructure and housing activity may slow down. However, the bantering on cement sector stocks will not be much as it has already bottomed out. The downward slide for cement stocks will continue because of the subdued demand outlook for cement in the near term as the monsoon is in full swing. Prices of the construction materials are also under pressure during the monsoon months.
While the industry managed to hike prices in May '13 (thereby reversing the loss/declines in Apr 2013), the monsoon season will lead to price declines across regions, excluding south. The stocks of cement companies are likely to trade with a negative bias also due to gloomy outlook by the industry players on margins and order inflow. Investors are seen preferring UltraTech stocks as the company is better-placed in terms of market presence, capital expenditure and expansion plans. However, see earnings of cement companies recovering sharply post October on account of improvement in prices and demand. We see prices firming up after the monsoons. We believe that near-term weakness in cement stocks can be used as opportunity by long-term investors to increase their holdings. We had expected demand to pick up after September on hopes of an increase in
