Cement stocks are oversold due to aggressive Bear hammering. Upto 50% rise is expected

Cement stocks are oversold due to aggressive Bear hammering. Short-covering is expected soon. Also, the fundamentals are intact. So, investors & traders can take advantage of the situation. Experts say that a 50% gain is expected

Today was a harrowing day for investors in cement stocks. All of them saw deep cuts across the board. Ultratech, the blue-chip behemoth, lost more than 5%. Even Grasim, its parent company, lost an equal amount. Mid-cap cement stocks like Dalmia Bharat, JK Cement, India Cements etc were also not spared.





The stocks were cornered by the Bears as soon as news came regarding the capacity expansion by Ultratech cement. It announced capex of Rs. 12,886 crores towards increasing capacity by 22.6 mtpa with a mix of brown field and green field expansion. This would be achieved by setting up integrated and grinding units as well as bulk terminals. The additional capacity will be created across the country.

This was interpreted to mean that there would be a glut of cement in the marketplace which would lead to price competition between the major players.



Mitesh Patel, the noted trader, confirmed that the crash in cement stocks was the handiwork of the speculators. He pointed out that delivery based selling in Grasim and Ultratech was only 42% of total volume while the rest was through Futures and Options. Infact, the Open Interest in the F&O of these stocks has increased by 10%+.



It is implicit in this that when the speculators cover their shorts, there will be a relief rally which can be taken advantage of

Even fundamental experts are recommending a buy at this stage.

Morgan Stanely gave Ultratech an 'overweight' rating and recommended a buy for the target price of Rs 8800. This is an upside of more than 50% from the CMP of Rs 5700. It stated that the demand cycle is well placed for an upcycle and that demand & rates will rise. Valuations are attractive.





ZEE collated the opinion of the other Global & domestic Brokerage firm such as CLSA, CITI, Goldman Sachs and Motilal Oswal, all of whom are bullish on the cement sector in general and Ultratech in particular.

Motilal Oswal warned that Cement stocks may underperform in the near term but still maintained a buy call on Ultratech saying that Capex announcement will help the company achieve a domestic Grey Cement capacity of 153.5mtpa by. It expects the company to turn net cash positive in FY26 fresh capex announcement.

Motilal Oswal set a target price of RS 7825, which is an upside of nearly 30%.

My Trade

I sold a Put on GRASIM at the strike price of Rs 1300 and collected a premium of Rs. 38. This makes my break-even price equal to Rs.1262.The total premium received is Rs 18,050 per lot. If GRASIM closes below Rs 1300 by the June expiry, I will take delivery of the stock for which I have kept aside Rs. 617,500.