The Telegraph
Since 1st March, 1999
Email This Page
Cement shares go all the way

Mumbai, Feb. 26: Nitish Kumar surprised a market that expected a modest hike in freight rates and no change in ticket prices, by actually making travel and movement of goods cheaper for many rail-reliant companies.

Operators saw in the railway minister’s munificence a sign the finance minister will also play to the gallery when he presents the Budget for 2003-04 on Friday. Analysts say Jaswant Singh will have to package his proposals in a manner that helps his party in nine state elections, and a general election due next year.

Dalal Street was not in raptures — the BSE sensex was down 21.44 points to 3260.48 — but cement and steel shares firmed up on hopes of transportation-cost savings.

Grasim, ACC, L&T, Gujarat Ambuja and Tata Steel were big draws of the day, clocking fat gains after investors expecting a boost to their profits scooped up the shares. The L&T share was up 3.77 per cent, Gujarat Ambuja 2.53 per cent while Grasim gained 2.02 per cent.

“The rail budget is a political stunt and, perhaps, a precursor to what might happen to the Union budget,” said Arun Kejriwal of Kejriwal Research & Investment Services.

The surge in a handful of shares notwithstanding, the markets have been somnolent and bereft of the usual pre-budget steam. For now, all eyes are on the derivatives contracts, due to expire soon. Companies more likely to get budget boosters have been in good demand, totting up heavy volumes in the derivative segment.

The railway minister’s announcement of sops for the industry put many punters on the wrong foot. “He is on a tight leash and I really wonder where he will get the money from. It is still a mystery. Probably, he will review the rates during the mid-term,” analysts said.

Kumar has proposed the reduction of classification of cement and clinker which will reduce freight rates by around 3.7 per cent. This will benefit the cement industry, as freight accounts for bulk of its production costs.

“He will give a fillip to power and infrastructure industries and raise income tax limits and cut tax benefits,” a fund manager opined.

The move to lower freight rates is indicative of the concern and fear that competition from road transport is now real. Among those that benefited are cement major ACC, where freight accounts for 30 per cent of its total cost of production.

Email This Page