Cement stocks are trading weak led by Madras Cements and Birla Corp. As per a leading daily, Madras Cements is thinking of selling its Bengal unit. The flagship enterprise of Chennai-based Ramco group is in talks with Lafarge and Holcim to divest its stake in this cement unit for about Rs 3.5 bn. Madras Cements has been approached by a number of cement manufacturers to sell the grinding unit. As per the management, they are still exploring options and have not come to any decision. Earlier PE (Private Equity) giant KKR was also interested in acquiring a stake but has now withdrawn.
The cement company moves clinker which is an input in cement manufacturing process from its plant in Andhra Pradesh and grinds it with gypsum and bags them as cement to be sold in Eastern markets. Clinker can be moved in bulk quantities and thus logistics costs can be brought down as against transportation of bagged cement. Madras Cements is currently trading down by more than 3%.
Auto stocks are trading weak led by Tata Motors and Force Motors. As per a leading financial daily, domestic car sales have fallen for the third straight month in June, its lowest in 27 months. Sales rose just 1.62% in the month as against 7% in May and 13% in April. The growth is also the slowest since March 2009 when it was 1.16%. These numbers have been released by the Society of Indian Automobile Manufacturers (SIAM). This is being attributed to rising interest rates and high fuel prices.
It may be noted here that demand for automobiles in India is considered as an indicator the country's economic health. It is mainly led by the middle class that takes into account fuel prices and loan rates while deciding to buy a car. Fuel prices have risen almost 9% in the past couple of months and interest rates have been raised several times to check inflation. The present situation is forcing the automobile companies to rethink their sales numbers for the year and cut back on their estimates for the second time this fiscal.