Cement stocks are likely to remain in focus as improving demand, higher government capital expenditure and recent price hikes offer some relief to the sector. However, rising input costs, particularly a sharp increase in petcoke prices amid geopolitical tensions in West Asia, could weigh on profitability in the second half of FY27.
Domestic brokerage Nuvama Institutional Equities has maintained a neutral stance on the cement sector, citing persistent cost pressures despite signs of a recovery in demand and pricing. The brokerage has retained JK Cement as its top pick, with a ‘Buy’ rating.
According to Nuvama, cement demand improved month-on-month across most regions in October 2026, supported by the withdrawal of the monsoon and pre-festive season demand. However, demand remained relatively weak in parts of eastern India due to continued rainfall and festive-season disruptions.
Government capex provides support to cement demand
Nuvama highlighted that government capital expenditure, which remained relatively subdued in FY25 and FY26, witnessed a significant improvement during the first half of FY27.
According to the brokerage, overall government capex, comprising spending by the Centre, states and central public sector enterprises (CPSEs), surged around 40% year-on-year during April–August 2026, compared with a 22% increase in the corresponding period last year. Spending accelerated further in August, registering a 93% year-on-year jump.
Central government capex rose 64% year-on-year during April–August 2026, compared with approximately 43% growth a year earlier. In August alone, central government spending nearly tripled from the year-ago period.
Meanwhile, state government capex increased around 11% year-on-year during April–August, although growth moderated to approximately 4% in August.
Nuvama also noted that capex by CPSEs, including departmental agencies, increased around 12% year-on-year to ₹4.3 lakh crore in H1FY27. However, CPSE spending declined approximately 17% year-on-year in September.
The brokerage believes the improvement in government spending, along with higher capital expenditure allocations in the FY27 Budget, has strengthened expectations of better cement demand during the financial year.
Housing activity remains a concern
Despite stronger government spending, the housing segment continues to show signs of moderation, potentially limiting the pace of recovery in cement demand.
According to Nuvama, pan-India residential project launches declined 10% year-on-year in volume terms during April–August 2026.
This follows an 8% decline in FY25 and a further 4% contraction in FY26, indicating continued weakness in new housing supply.
The brokerage’s assessment suggests that while infrastructure-led demand could provide support, the slowdown in residential construction activity remains a key factor to monitor.
Cement prices rise, but input costs pose a challenge
Nuvama’s channel checks indicate that cement manufacturers implemented price hikes across regions in October 2026 as demand improved following the monsoon.
Cement prices increased by approximately ₹10–15 per bag in the trade segment and ₹15–20 per bag in the non-trade segment.
However, the brokerage cautioned that these increases may not be sufficient to offset the sharp rise in input costs.
Petcoke prices have surged to approximately $187 per tonne, marking an increase of around $39 per tonne quarter-on-quarter, amid escalating geopolitical tensions in West Asia.
According to Nuvama, elevated petcoke prices are likely to keep production costs high during H2FY27, putting pressure on cement manufacturers’ profitability.
The brokerage indicated that additional cement price hikes would be necessary to cushion the impact of rising costs and protect margins.
Cement stocks outlook: What should investors watch?
Looking ahead, Nuvama expects the sector’s performance to depend on the pace of demand recovery following the monsoon, the sustainability of cement price increases and movements in input costs.
The brokerage said trends in housing construction and infrastructure spending would also play an important role in determining cement demand and stock performance.
While stronger government capex and improving cement prices are encouraging developments, Nuvama believes rising fuel costs could limit earnings improvement in the near term.
Against this backdrop, Nuvama has maintained its neutral view on the cement sector, while retaining JK Cement as its preferred stock with a ‘Buy’ rating.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
