Cement Stocks Outlook for the week (02 -06.Jul.2012)
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RUPEE DESK: Cement Stocks Outlook for the week (02 -06.07.2012)
Stocks of major cement companies are likely to take cues from the despatch and production data for June that will be detailed by companies on Monday. Sales volumes in June to have remained strong like the preceding months, as monsoon has not picked up strongly yet. Cement demand typically dries out by June-end as construction activity in most parts of the country comes to a halt due to rains. Rainfall during the season that starts Jun 1 has been deficient in all sub-regions in the country, barring east and northeast India. Weather department classifies rainfall below 10% normal as deficient. Cement prices, which usually start falling by June-end due to dampening demand, have held at elevated levels until now. We are hopeful that this will aid companies to post a healthy performance for Apr-Jun, as cement prices have remained strong throughout the quarter. Additionally, easing input costs will aid cement makers' performance.
On hopes of a good performance for Apr-Jun, stocks of major cement companies ended 3-4% higher this week despite Competition Commission of India's order a week ago levying hefty penalties on 11 companies found guilty of cartelisation. On Jun 21, CCI issued an order holding UltraTech Cement, ACC, Ambuja Cements, India Cements, Madras Cements, Lafarge India, Jaypee Cements, Century Cement, Binani Cement, and JK Cement guilty of cartelisation. Grasim Cements, which has merged with Ultratech Cement, has also been found guilty. The companies have been penalised 50% of their respective net profit for financial years 2009-10 (Apr-Mar) and 2010-11. The impact of this order is unlikely to be seen in the near-term as most companies have decided to challenge the order in the Competition Appellate Tribunal.
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