New supplies to come in cement; prices to remain sluggish

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Udayan Mukherjee of CNBC-TV18 said that we are entering that phase of at least four quarters where a lot of the new supply comes in and prices remain very sluggish.

Below is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also watch the accompanying video.

The results were not too bad for the current quarter, ACC did well, Ambuja wasn't too bad; the southern companies were pretty bad. But after the post result kind of optimism people are still asking themselves if this is the time, after lot of speculation on when the new supply will come in, is when prices will struggle to stay afloat even at current levels. Or they are headed further down because what the market was talking about three quarters back is now becoming a reality as more and more supply kicks in. So are we entering that phase of at least four quarters where a lot of the new supply comes in, prices remain very sluggish.

In the South they continue to get decimated, and therefore, cement company performance is also trailed down. This will not be helped by the fact that raw material prices are also going up again and that will have their own margin pressures.

So have we seen the best of the cement earnings for the next four quarters? It is conceivable that it may work out that way. So I don't know how these stocks will pan out but it is a reasonable expectation that cement stocks will not be great outperformers till this whole situation becomes quite clear and the market gets affixed on how much pressure they have to deal with in the near-term.

So if you have a view beyond four-five quarters, maybe cement will start to move once again but maybe the opportunity to accumulate cement stocks lies ahead in the next three-four quarters and you must probably not expect great outperformance in the interim period while this supply pressure plays out.