The company has basically benefited due to the reduction once again in excise duties to nil from 8 per cent on asbestos cement products that have a flyash content greater than 25 per cent. In addition, it has the advantage of volume growth since its additional capacities have come on stream.

The unfortunate part is that the additional manufacturing capacities have ledto both higher fixed and interest costs as a result of its expansions in asbestos cement sheets. These were major factors in bringing down profits for the first quarter. Despite the growth in revenues and the maintaining of margins the result of higher fixed costs was that the growth in the net profit for the first quarter was barely by 1.68 per cent against the growth in sales by 18.3 per cent.

The Roofit Industries stock has displayed a strange pattern with the price refusing to fall below Rs 32. It shows signs of being supported actively at this level since volumes are also above average.

Eternit Everest: Easily the worst performance in the asbestos cement sheet industry has come from Eternit Everest, which incidentally is also the market leader in this industry. The third quarter performance saw the company report a 50 per cent fall in profits, while revenues remained flat. For the nine months ended in September, 1998, revenues recorded a marginal growth but the fall in profits was to theextent of 53 per cent, as margins were compressed.

The company has obviously been affected by the rising cost of imports of its raw material, asbestos cement fibre, which is not available in India at all. The depreciation in the rupee as well as the additional customs duty have affected operating margins.

There is a close correlation between offtake of asbestos cement products and industrial investment since it is used as a roofing material for industrial sheds, a decline here will pull down offtake to some extent, which is reflected in the lack of top line growth.

The company has also begun to make investments in more up market products such as in building material products, which have increased fixed costs. The stock has understandably been in a decline but following certain budget sops given to the asbestos cement sheet industry there was a mild recovery here which is the dominating industry player. Since the announcement of the nine month performance there has been a resumption in the stocks declineto its current price of Rs 43.

Market direction: The trend displayed in the market on Friday was rather a strong one. There are some signs of this strength lasting for sometime. First, there has been a very clear shift in assets from popular stocks such as software and fast moving consumer goods (FMCG) to commodity stocks.

The thinking behind this restructuring stems from the fact that a lot of profits continue to be locked into software and FMCG assets and these apparently are being liquidated, led by FIIs such as Openheimer which once were actively chasing software stocks. Therefore, on a day that saw the likes of cement and steel companies such as as Reliance, Grasim and Tisco besides financial institutions such as ICICI rise also saw major declines in stocks such as Satyam (which is in a no-delivery period and hence easy to exit from) Pentafour Software and Hindustan Lever. Second, for once the market has been able to sustain a rally even though the heaviest weighted stock, Hindustan Leverfell. Thus the signal of a broader, deeper rally in the market.