Cement stocks fall up to 7% – new wave of consolidation on the cards?

Cement stocks: Succumbing to market weakness, the cement companies' shares price ended up to 7 per cent lower on the exchanges during Wednesday’s trading session. The cement sector has been in focus this month and most of the stocks have reported over 35 per cent growth in a month on the bourses.

Heavyweights such as Ambuja Cement, ACC, UltraTech Cement and Shree Cement crashed 5 to 7 per cent followed by broader markets cement stocks such as India Cements, Ramco Cement, JK Cement, Birla Corporation, Heidelberg Cement that declined 5 to 3 per cent on the BSE. JK Lakshmi and Nuvoco Vistas each slipped over 7 per cent.

In comparison, the BSE Sensex fell 262.96 points or 0.44 per cent to settle at 59,456.78. During the day, it tanked 444.34 points or 0.74 per cent to 59,275.40. While Nifty50 slipped 97.90 points or 0.55 per cent to end at 17,718.35.

On consolidation hopes in the cement industry, the majority of the cement stocks have outperformed markets in the last one month.

Individually, shares of JK Lakshmi Cement, India Cements, Ambuja Cement, and Nuvoco Vistas Corporation each soared up to 37 per cent in a month.

The cement industry in India is largely competitive with multiple players operating in same regions and consolidation has long been on the cards, domestic brokerage firm Nirmal Bang said.

It believes that the sector has navigated the impact of higher input costs well through judicious inventory management, switch to petcoke from coal, higher usage of alternative fuels and increased usage of green power, which eventually has provided some cushion to the margins.