India: Grasim Industries Soars 10% Amid Rally in Cement Stocks

Byrebecca3360

Updated Tue, 10 Jun 2014 10:24:59 GMT

Cement stocks rallied on Monday on hopes that the new government's focus on infrastructure will translate into higher demand and lead to an absorption of the current overcapacity in the industry.

Four of top five Nifty gainers were cement stocks on Monday. As of 10.50 a.m. Grasim Industries led the index with 9.1 per cent gains followed by Ambuja Cements, ACC and Ultra Tech Cement, all of which traded over 5 per cent higher.

Neeraj Dewan, director at Quantum Securities told NDTV that cement is a play on economic and infrastructure recovery. Companies with capacity will gain advantage and there might be some more price hike going ahead. "There might be short term corrections, but investors should get decent gains over next 2-3 years," he added.

South India-based cement companies hiked cement prices by 3-30 per cent last week.

Cement demand, which grew at a compounded annual growth rate (CAGR) of 6 per cent over the last four years until fiscal 2014, has likely bottomed out, analysts say.

Asia Pacific focused brokerage CLSA maintained a buy on Grasim Industries with target price at Rs. 4,900 per share. The brokerage expects pick-up in cement business and says the stock is trading at excessive discount despite an improvement in outlook. Grasim is a conviction buy for CLSA.

Meanwhile, the Sensex and Nifty hit another record high today. The Sensex scaled the 25,600 mark, while the Nifty traded near the 7,650 levels.