Cement stocks slippery on sluggish demand

STOCK MARKET WATCH

However, some market participants are attributing sluggish move in cement shares directly to a fall in demand due to pause in construction activity and high inflation and interest rate slowing it down further.

They do not expect any further announcement by government on cement prices as prices are expected to fall by Rs 3-5 in July.

"Cement shares would continue to witness weak movement despite cheap valuations due to rising uncertainty over pricing scenario. Surge in inflation has made things worse for the realty and construction industry and thereby demand for cement as well," said head of equity sales at an institutional brokerage.

Most cement shares are trading around or below their replacement cost of $100 per tonne, and this can be a good opportunity for long-term investors, analysts said.

However, with fall in cement prices because of excess supply through proposed expansion and rising costs that cannot be passed on, their margins will definitely be impacted, said an analyst with a foreign brokerage.

In the last quarter, prices of fuel, coal, transportation, and packaging costs have risen significantly, he said.