GOLDEN RULES FOR TRADING

Cement Stocks Outlook for the week – 04 to 08.04.2016 RBI review to guide stocks; UltraTech seen up

Cement Stocks Outlook for the week – 04 to 08.04.2016
RBI review to guide stocks; UltraTech seen up

Stocks of cement manufacturers are expected to be guided by the Reserve Bank of India's monetary
policy review on Tuesday. UltraTech Cement's shares are expected to continue to rise next week,
following its board approving a pact to buy capacity of 21.20 mln tn a year from Jaiprakash Associates at an enterprise value of 159 bln rupees. Jaiprakash Associates plans to cut its debt with the proceeds of the sale. Yesterday, stocks of the company ended up 10.4% at 8.50 rupees on the National Stock exchange. Acquisition of Jaiprakash Associates' capacity will augur well for UltraTech in terms of gaining market shares, enhancing growth and saving capital costs.

After the deal, UltraTech will become the fourth-largest cement player globally, by capacity. From a
long-term perspective, the deal is expected to be earnings-accretive for the company, led by synergy
benefits. Further, with this deal, UltraTech will have presence across various regions (except the
Northeast,) enabling it to reap the benefits of a demand recovery led by higher government spending
on infrastructure and a revival in housing demand. With industry-leading growth, following consistent capacity addition, higher margins and healthy cash flows, the brokerage house maintains its positive view.

Economic developments since the February policy review strengthen the case for monetary easing.
The central government has exhibited fiscal prudence by sticking to the 3.5% fiscal deficit target for
2015-16 (Apr-Mar), something the RBI has pitched for. Cement stocks are likely to gain if interest
rates are cut, as cheaper borrowing is expected to boost industrial activity.