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A prolonged delay in revival of demand may lead to a negative bias for stocks of cement makers next week, as companies may not be able to take the much-awaited price hikes. Typically, cement prices are increased in Oct-Dec as demand returns after a seasonal slump in construction activity during Jul-Sep. But high interest rates and elections in some states led to subdued real estate and infrastructure activity in Oct-Dec. Cement demand did not see any revival in January also.
Cement makers are now anticipating a strong uptick in demand after the Reserve Bank of India reduced key policy rates on Tuesday, which is expected to make loans for construction and buying houses cheaper. Prices of diesel were raised by 5 rupees per ltr in September, and there was another marginal increase earlier this month. Also, the price hike on bulk usage of diesel has increased the cost pressure on some cement companies, as they use generators to run plants during power cuts. Our view on the cement sector remains positive.
