Cement Stocks Outlook: Sideways with positive bias next week

[B. Karthick]

Cement Stocks Outlook: Sideways with positive bias next week
Saturday, Sep 20

Shares of most cement companies are likely to move sideways with a
positive bias next week amid a volatile broad market as traders may
shift some of their positions into this relatively defensive sector.
Impending expiry of September derivatives series Thursday is also
expected to provide support to frontline stocks due to rollover of
positions from the current series, adding significant short positions
exist in these counters.
In the week gone by, some cement shares witnessed gains as
volatility in the broad market prompted investors to churn portfolios
in favour of cement shares.
However, we feel the rise is also unlikely to be significant as
outlook on pricing of cement hereon is sluggish.
A hike, if any, may not be more than 3-5 rupees a bag (1bag=50kg)
in the next one month.
Cement majors such as ACC, Ambuja Cements, Grasim Industries, and
Dalmia Cement Bharat have already voiced their concerns over rising
cost pressures.
Prices will have to be raised at least 20 rupees in order to
protect their margins.
Prices are expected to move upward post-monsoon because of rise in
demand. However, the rise in cement prices may not be more than 5
rupees in the western region in the next four-five months.
The industry is expected to commission capacity worth 32 mln tn in
2008-09 (Apr-Mar) and 47 mln tn in 2009-10, even with delay in
expansion.

STOCK VIEW
Technically we expect cement shares to move sideways with a
positive bias next week.
Shares of Ambuja Cements are likely to touch 88 rupees in the next
couple of weeks, with support seen at 81 rupees.
ACC shares are expected to continue to move between 580-621
rupees.
Shares of India Cements are likely to move towards 139 rupees,
while support for the stock can be expected at 125 rupees.
Shares of UltraTech Cement are seen finding support at 535 rupees
in the near term, with key resistance likely at 590 rupees.
Jaiprakash Associates is expected to witness selling pressure
around 143 rupees, while support for the stock can be expected around
128 rupees.

This week's closing prices, in rupees, of key cement shares, on
National Stock Exchange, compared with previous week:

Company Closing price Closing price % Change
Sep 19 Sep 12
.
ACC 606.80 592.05
2.5%
Grasim Industries 1,918.55 1,979.40 (-) 3.1%
Ambuja Cements 85.00 79.00 7.6%
India Cements 129.40 139.35 (-) 7.1%
Ultratech Cement 563.55 565.00 (-) 0.3%

Sensex 14042.32 14000.81 0.3%
Nifty 4245.25 4228.45
0.4%

End

B.Karthick
Research Analyst.