The leading cement companies, except for Gujarat Ambuja Cement (GACL) and India Cements, saw their stock prices rise by an average 4.68 per cent in the past ten days (see table). The current uptrend started from October 18 when Sensex dipped to its 52-week low of 3545.01 points. As the BSE Sensex dipped to this low, this has also provided an opportunity to investors to make value investing. Says Mr K K Mittal of Escorts Mutual Fund, ``Valuations of several cement stocks have turned attractive. Especially when the demand for cement is expected to pick up in October-December.''

Also, the first-half show from companies like ACC and Grasim has been better than market expecations. The fact that the Central Government's renewed thrust on some development activities has aided the sentiments at these counters. Grasim Industries topped the list of gainers as the stock rose 10.81 per cent in 10 days.

However, the current rally does not have much depth. Feels Mr Sanjay Kaul, a Delhi-based broker and director at the Delhi Stock Exchange, ``The current rally is short term in nature. Since the ICE sector is highly volatile, investors are parking funds in other sectors.''

Grasim Industries has already announced a buyback offer which could be in a price range of Rs 200-220 per share. Thanks to this, the Grasim stock touched a high of Rs 202 on October 27. The company also witnessed a 13.7 per cent jump in sales and 42.3 per cent rise in net profits for the year ended March 2000, mainly due to acquisitions. The company has also plans to merge Dharani Cement with itself. Another company, Shree Cement is reportedly eying Nihon Nirmaan Manufacturing Company.

ACC, in which Tatas' recently relinquished their stake, has remained in the good books of investors. The company has recently come out with a better than expected financial performance. Though the first-half net profit has declined, the fall has been due to an extraordinary writedown of Rs 20 crore. Sales of the company have increased by 9.2 per cent in the second quarter. The stock has gained by 7.37 per cent to touch Rs 92.55 on October 27. Net profit of Madras Cements in the first quarter increased by about one per cent. For the quarter ended September 2000, the sales have increased by 15.7 per cent.

In contrast, Gujarat Ambuja was battered on the stock markets. Its market price dropped by 4.19 per cent over the last ten days, nearer to its 52 week low of Rs 131.45, due to poor financial results, though the company is the largest and the most cost effective producer of cement in India. Some of its recent acquisitions, like DLF cement, have proved to be a burden on the company resources. Sales have slowed down due to drought conditions in Gujarat and nearby areas.

Also, the spurt in oil prices is likely to increase cost of production and reduce margins of GACL, which has a captive power plant. This has forced the three cement majors like ACC, L&T and GACL to hike prices recently, by Rs 6 to Rs 7 for a 50 kg bag.

And what does the future hold for these biggies? Mr Kaul believes that Indian companies cannot match the efficiencies of foreign cement companies. ``The Indian companies will have to shut down their operations once the foreign counterparts arrive in India,'' he says.

But this is not the general feeling. Mr U S Gupta of NDA Securities feels that though the scrips in the sector may not appreciate in the short term, they hold promise in the long term. Mr Kamal Gupta of K K Securities agrees, according to him, ``Companies like India Cements and Grasim Industries are a good bet for the long term, specially when the prices are at their 52 week lows."