Cement stocks gain up to 10% in otherwise weak market; mid-cap companies outperform heavyweights

Cement stocks gain: In an otherwise volatile market, the cement companies' share price surged up to 10 per cent on the BSE intraday during Wednesday’s trading session, snapping six-day losing streak. Cement stocks from broader markets outperformed the major cement companies during today’s session.

Individually, India Cements share jumped 10 per cent to Rs 254.7 per share, followed by Star Cement up almost 5 per cent to 103.6 per cent and Ramco Cements up 3.5 per cent to Rs 742.1 per share on the BSE intraday.

Whereas heavyweights such as Ambuja Cements, ACC, UltraTech Cement and Shree Cement gained between 1-2 per cent intraday, however, they are trading flat at around 02:00 PM on the BSE. In comparison, the S&P BSE Sensex was down 0.29 per cent at 56,939 points at the same time.

Shares of Heidelberg Cement India, India Cements, Dalmia Bharat, JK Lakshmi Cement, ACC, Birla Corporation, and Ambuja Cements have declined between 6-12 per cent in the last five sessions, as against a 4 per cent decline in the benchmark index.

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

Another domestic brokerage firm Motilal Oswal said, “A consolidation in the industry if it occurs, will boost pricing power, synergies in the form of cost reduction and operational efficiency; and cross-branding, which will help expand market reach.” 

While the long-term story of Indian cement companies remains intact amid massive infrastructure outlay, near-term uncertainties about a change of management among others could cloud valuations, another market analyst Tanusree Banerjee, Co-Head of Research Equitymaster, said.

Cost pressure is expected to ease in coming quarters as the global petcoke prices have corrected by around 40 per cent in the past 4 months, a domestic brokerage firm Emkay Research said.