Steel, cement, oil shares celebrate

Sandeep Singh
Posted online: Wednesday, February 27, 2008 at 2258 hrs
New Delhi, February 26: The market gave a thumbs up to the rail budget as companies in the steel, cement, oil and rail transport support services saw their share prices rise during the day. The railway minister’s declaration around freight rate cuts for some segments and keeping them constant for others have come up as a positive to several industries.
Steel stocks, in particular, saw a rise in prices across the board as the railway minister left iron ore freight prices untouched. Lalu’s declaration of manufacturing only stainless steel coaches from 2009-10 onwards saw the share prices of steel manufacturing companies move up steeply.
“It is a long term positive and adds to the global positivity on steel,” said Ketan Karani, vice president research, Kotak Securities. Jindal Stainless, which is the market leader in stainless steel production saw its share price rise by 7.2 per cent during the day to close at Rs 160. Other steel producers — Monnet Ispat, Jindal Steel, Bhushan Steel, SAIL and Tata Steel also saw their share prices go up.
Reduction in freight rate of fly ash by 14 per cent and of petrol and diesel by 5 per cent also pumped up the share prices of oil marketing companies and the cement companies. “Most Indian cement manufacturers mix fly ash for their cement production and hence the reduction in freight is important for them,” said Amitabh Chakraborty, president (equity), Religare Enterprises. Grasim went up by 5.1 per cent, India Cement was up 4.8 per cent, Binani Cement rose by 3.1 per cent, while Madras Cement and Mysore Cement were up by 2.2 and 2 per cent respectively.
Oil marketing companies also saw their share prices rise — BPCL up 5.4 per cent, HPCL up 4.8 per cent and Indian Oil up 4.2 per cent. This came on the back of Lalu announcing a 5 per cent cut in the freight of petrol and diesel. “Transportation cost is passed on to the consumers and any reduction in freight rate at this time will help oil companies as they are absorbing a lot of expenditure on themselves,” said Chakraborty.
Companies operating in the railway transport support services also saw their share prices rise as the market gave thumbs up to the rail budget. Concor and Gateway Distriparks among others saw their share prices rise by 1.6 and 6.3 per cent respectively. While BEML, one of the largest wagon makers also saw its price rise by 3.1 per cent with the Railway minister announcing 20,000 new wagons to be manufactured in the year 2008-09.
Other than the positive impact of the budget there was also a negativity that built up in the road transport segment as companies operating in the segment saw a decline in their share prices during the day. Transport Corporation, Patel Integrated Logistics and Frontline Corporation saw their prices dip by 0.7, 3.1 and 4.9 per cent respectively. “It is only an immediate reaction and in India, road transport companies mostly bring the materials to railway yards from where they are transported by trains, so it won’t impact much on the road transport companies,” said Chakraborty.