Why is ACC falling/rising?

Recent Price Movement and Technical Indicators

ACC’s current price of ₹1,771.60 represents a decline of ₹7.35 or 0.41% as of 08:17 PM on 12-Dec. This drop is part of a broader negative trend, with the stock losing 4.4% over the last eight days. The recent fall has also resulted in the stock hitting a new 52-week low, signalling persistent selling pressure. Notably, ACC is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, which typically indicates a bearish technical outlook. This technical weakness may be discouraging short-term traders and contributing to the ongoing decline.

Adding to the bearish sentiment, the stock underperformed its sector by 2.13% on the day, suggesting that investors are favouring other companies within the cement and construction materials space. Furthermore, investor participation appears to be waning, as evidenced by a 24.53% drop in delivery volume on 11 Dec compared to the five-day average. Lower trading volumes often reflect reduced enthusiasm or uncertainty among investors, which can exacerbate price declines.

Comparative Performance Against Benchmarks

When analysed against the Sensex benchmark, ACC’s performance over various time frames reveals a significant underperformance. Over the past week, the stock declined by 1.50%, compared to the Sensex’s modest fall of 0.52%. The one-month period shows a sharper contrast, with ACC down 4.42% while the Sensex gained 0.95%. Year-to-date, the divergence is even more pronounced: ACC has fallen 13.73%, whereas the Sensex has risen 9.12%. Over the last year, ACC’s stock has lost 20.52%, in stark contrast to the Sensex’s 4.89% gain. The three-year and five-year returns further highlight this disparity, with ACC lagging significantly behind the benchmark’s robust gains.

Fundamental Strengths Supporting the Stock

Despite the recent price weakness, ACC’s underlying fundamentals remain strong. The company reported a remarkable 155.94% growth in profit after tax (PAT) over the latest six months, reaching ₹1,494.61 crores. Net sales also expanded by 22.22% to ₹12,018.90 crores during the same period, signalling healthy demand and operational efficiency. The company’s return on capital employed (ROCE) stands at an impressive 17.88%, while return on equity (ROE) is a solid 16.2%. These metrics underscore ACC’s ability to generate attractive returns on invested capital.

Valuation-wise, ACC trades at a price-to-book value of 1.7, which is considered reasonable and below the average historical valuations of its peers. The company’s PEG ratio of 0.1 further suggests that the stock is undervalued relative to its earnings growth, making it an appealing proposition for long-term investors. Additionally, ACC maintains a low debt-to-equity ratio, effectively zero on average, which reduces financial risk and enhances balance sheet stability.

Institutional investors hold a significant 27.75% stake in ACC, reflecting confidence from entities with extensive resources and analytical capabilities. This institutional backing often provides a degree of support to the stock, even amid short-term volatility.

Balancing the Contradictions: Why the Stock Is Falling Despite Strong Fundamentals

The disconnect between ACC’s solid financial performance and its declining share price can be attributed primarily to technical and market sentiment factors. The persistent downtrend, confirmed by the stock trading below all major moving averages and hitting new lows, has likely triggered selling from momentum-driven investors and traders. The reduced delivery volumes indicate a lack of conviction among buyers, which compounds the downward pressure.

Moreover, the broader market environment and sector rotation may be influencing investor preferences, with capital flowing into other sectors or stocks perceived as having better near-term prospects. While ACC’s fundamentals suggest it is undervalued and financially sound, the market’s short-term focus on price momentum and liquidity dynamics is weighing on the stock.

Investors looking at ACC should weigh the company’s impressive profit growth, strong returns, and low leverage against the current technical weakness and subdued investor participation. The stock’s attractive valuation metrics and institutional support provide a foundation for potential recovery, but the immediate price action reflects caution and a wait-and-see approach by market participants.

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