Market has not been talking much about Cement stocks of late. Recently there was some bit of news about South based enjoying some price increase and we did see some stock price rally. But we also heard that this price rise is most likely rolled back.
A look at the charts of Cement majors shows that they have all been rallying together with the market. So, a relative performance chart of the big names throws up some interesting information. Now, one should understand that relative performance is quite sensitive to the time frame used for the comparison. So the daily, weekly, monthly charts will all look quite different.
For example, if one looks at the shorter term, one would find that Ramco Cement and India Cement have improved the most in recent times. So from a trading or momentum investing point of view these two stocks appear to be the best bets. Most of the others like ACC, Ambuja, Ultratech, are performing in line or slightly short of the Nifty performance. While Ramco has been a consistent out performer, the sharp rise in India Cement to turn a small out performer is a surprise. So something seems afoot here.
But if one raises the time frame to weekly charts, we find that all of these counters have been underperforming the Nifty since May 2018. So the sector has been showing only near term strength, it appears. While Ramco and Shree Cement continue to remain the top performers relative to the others, we will find that India Cement, which has shown great traction in the near term, comes a distant seventh among the 7 stocks examined. So it is clear that what we are seeing in India Cem is only a near term rally and it should be dealt with as such.
Moving to the monthly charts we find a different story yet again. Here we can see the strong out performance that continues to be maintained by Ramco and Shree Cement, making them therefore the best of the lot as they are showing the signs of out performance are present in all time frames.
What is interesting in the Monthly RS chart is that stocks like Ambuja and ACC are underperforming the Nifty along with India Cement. Ultratech, which was a steady performer in lower time frames, comes into a reckoning with a good out performance vis-a-vis the Nifty and is placed third in the ranking behind Shree and Ramco.
What is also a bit surprising is that Grasim is among the worst performers within this space. It is a poor performer in Daily and Weekly time frame RS and even in the monthly, it is seen to be dragging its feet and has now dropped to be an underperformer compared to the Nifty.
So, the conclusions from this Relative Performance study are as follows:
- The two best stocks to invest in Cement from short medium or long term perspective are Shree Cement and Ramco Cement.
- Near term strength of Ramco Cement appears to be even stronger than Shree Cement so it can be the preferred bet in the sector.
- India Cement has shown a strong upward action in the short term and is seen rallying. Could be a trading bet for now and one may keep an eye on its continued improvement.
- Grasim is the worst performer in all time frames and can be left alone. Or if one needs a hedge among cement stocks, this would qualify as a short hedge.
- ACC and Ambuja are seen to be, at best, market performers in the shorter terms but are placed weak compared to Nifty and peers over the long term. Hence they can be avoided until sector demand is high.
- Ultratech can be an also ran for the winner list.