Cement stocks tank over 3%; what should you do next?

The cement stocks take a hit after UltraTech Cement lines up a Rs 12,866 crore capex plan. The company has announced a 22.6 MTPA increase in its grinding capacity via a mix of brownfield and greenfield investments.

UltraTech Cement announced a 22.6 MTPA increase in its grinding capacity via a mix of brownfield and greenfield investments. This increase has come after the company wishes to expand its capacity as government plans to spend a record Rs 7.5 trillion this year on road infrastructure.

The race between the cement companies to increase their capex has got intense as they want to acquire more business. Cement companies are already under pressure due to elevated coal and fuel prices. This is likely to produce a dent in impact cost and ultimately affect profitability. The inability to pass on the cost on the customers’ side is adding fuel to fire.

With this, most of the cement stocks have witnessed severe profit booking. Ambuja Cement (-1.66%), Shree Cements (-4.19%), Grasim (-5.70%), India Cements (-2.73), Ramco Cements (-4.03%) have all witnessed a sell-off. Meanwhile, UltraTech Cements (-3.50%) has also seen a downfall.

As per the technical chart of most of the cement stocks, nearly all of them are trading below their 200-DMA. With today’s fall, most of the stocks are trading near May’s low. The trading volume has been huge, indicating a strong sell-off and short build-up. The Relative Strength Indicator (RSI) is placed in the bearish zone, while the MACD suggests a negative trend. The ADX of most of the stocks are pointing northwards, indicating a strong downtrend. Meanwhile, KST, TSI as well as Elder Impulse System indicate a strong sell.

Considering the price action and technical parameters, the stocks are expected to remain under pressure for some more time. Traders have a good opportunity on the downside while investors need to wait for some more time till the stocks form a base at lower levels. Moreover, the stocks are expected to remain volatile considering the situation.