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Stocks of major cement companies are expected to be traded with a positive bias during the week ahead on hopes of revival in demand for construction material and the eventual increase in cement prices. Even though on the ground there has been virtually no pick up in demand so far, traders are positive that there will be upward price movement with the end of the monsoon. Every year, cement prices increase after the monsoons, when construction picks up. The increase in cement prices were in the range of 20-50 rupees per bag across most markets in September. Price hikes came after months of cuts and the current round of price increases took retail prices back to May levels. Cement stocks have moved up around 10-15% from the lows of August, in line with the cement price increases. With the Election Commission announcing dates of voting in several states, expectations are that infrastructure activity will now pick up. Historically, over the last 22 years, every general election in India, has seen cement demand pick up sharply in the six months prior to elections. Cement demand remains lackluster, and while costs have increased, the only driver for the very sharp cement price increase seen over the past few weeks, has been management of supply. Cement companies have been facing low realisations due to a slump in volume offtake for some months now, and this was reflected in their Apr-Jun earnings. Jul-Sep earnings may also be subdued and will revive only after October.
Stocks of major cement companies are expected to be traded with a positive bias during the week ahead on hopes of revival in demand for construction material and the eventual increase in cement prices. Even though on the ground there has been virtually no pick up in demand so far, traders are positive that there will be upward price movement with the end of the monsoon. Every year, cement prices increase after the monsoons, when construction picks up. The increase in cement prices were in the range of 20-50 rupees per bag across most markets in September. Price hikes came after months of cuts and the current round of price increases took retail prices back to May levels. Cement stocks have moved up around 10-15% from the lows of August, in line with the cement price increases. With the Election Commission announcing dates of voting in several states, expectations are that infrastructure activity will now pick up. Historically, over the last 22 years, every general election in India, has seen cement demand pick up sharply in the six months prior to elections. Cement demand remains lackluster, and while costs have increased, the only driver for the very sharp cement price increase seen over the past few weeks, has been management of supply. Cement companies have been facing low realisations due to a slump in volume offtake for some months now, and this was reflected in their Apr-Jun earnings. Jul-Sep earnings may also be subdued and will revive only after October.
