Stay away from cement stocks: Rakesh Arora

Arora told CNBC-TV18, "We are negative on cement sector primarily from the fact that demand supply situation looks adverse at the moment and we are expecting additional 50 million tonne of capacity to hit in FY13 and FY14 so capacity utilisation will not improve appreciably above 70%. Second is the sector has been holding up pretty well and we saw the numbers come out reasonably okay because supply discipline is sustained and prices sustained at higher levels but cost increases are huge, so all efforts are just to maintain the margins."

He further added, "Third is analysts are already building in that these numbers will sustain, so nobody is doubting whether supply discipline can breakdown which is very much possible given that we are into huge oversupply situation and finally we are also saying that competition commission is likely to come out with penalties later this month or early next month which would mean that stocks will underperform."

"Global experience tells us that whenever penalties are hits stocks underperform for the next 12 months and decline by 20-25%. So best case scenario is already built into the numbers and the risks are on to downside and valuations at 19-20 PE is far away from comforting, they are at all time peak, so investors should stay away from cement stocks."