Grasim Industries (up 4.3% to Rs 466.45) rose as much as 5.3% to a high of Rs 471.25 earlier in the day. ACC (up 3.1% to Rs 162) and Gujarat Ambuja Cements (GACL) (up 1.7% to Rs 192) made significant gains as well. Volumes were decent in Grasim and ACC, at 1.2 lakh shares and 1.8 lakh shares, respectively.

Having already staged a revival over the past few months, cement shares hardened further after Grasim, on Tuesday (17 June 2003), entered into a deal with L&T to acquire the latter's cement division. From a recent low of Rs 388.45 on 16 June 2003, Grasim gained 19.2% in just two trading sessions to a recent high of Rs 463.40 on 19 June 2003. Profit taking saw the scrip slide later to Rs 447.15 on Tuesday (24 June 2003). The stock once again bounced back today.

ACC gained 24.7% from a low of Rs 129.45 on 9 May 2003 to Rs 161.50 on 18 June 2003. It later slipped to Rs 157.10 on Tuesday before bouncing back today. GACL surged 30% from a low of Rs 149.40 on 11 March 2003 to hit a high of Rs 194.25 on 19 June 2003. The stock later slipped to settle at Rs 188.75 on Tuesday before staging a recovery today.

Defying expectations that prices of cement scrips will correct further following a sharp surge recently, cement stocks surged today. It is not known what has triggered the fresh optimism today rise, but there are expectations that cement prices will firm up following the latest consolidation in the cement sector.

Analysts see an improved outlook for the cement industry because no major capacity expansion in the cement sector is on cards and also because the volumes growth in cement remains good at about 8% per annum. Construction demand and highway projects have ensured a good growth in cement demand in recent years. However, margins for cement supplies for the large construction projects and highway projects, it is reckoned, are low.

The key trigger for the rise in cement prices in the near future is the surge in housing demand if the monsoon this year is good, analysts say. The consolidation in the cement sector with Grasim's acquistion of the cement division of L&T augurs well for a recovery in cement prices. Cement product prices had tumbled to among their lowest levels only recently.

Cement analysts feel that with two major players now emerging in the cement sector (Gujarat Ambuja and Grasim), undercutting in cement prices will diminish as bargaining power would shift to suppliers. "Even if there is a 4-5% rise in realisation , the performance of cement companies would improve this year," says a cement analyst.

The L&T cement division acquisition makes Grasim a market leader in the cement business. Grasim has a capacity of 14.12 million tonnes and L&T has a capacity of 16.50 mtpa. Thus, Grasim's combined capacity would go up to about 30.6 mtpa, which will account for 21.9% of the total installed capacity of about 140 million tonnes in India. In comparison to the Grasim-L&T combine, the GACL-ACC combine has a total cumulative capacity of 28.5 mtpa.