Monsoon is a headwind, but continued infra push is a bigger tailwind: 5 southern India focussed cement stocks with upside potential of upto 44%

Synopsis
With the monsoon coming, there is always a cyclical pressure on cement stocks, with the narrative being that in monsoon construction activity slows down. There is no doubt that this happens but over the last few years it has been seen that the decline in demand is not as strong as it used to be, maybe because the overall thrust on infrastructure is far higher or the fact that as the economy recovers, the overall demand matrix is better for cement companies. The fact is that cement has been a sector where most of the analysts have been caught off guards. The stocks have done well and a large number of analysts have been sticking to their stands that pricing and capacity utilization is an issue. Another reason to look for cement stocks is the fact that we have a state election coming in near term and that will lead to a situation where push to infrastructure projects would be given and that is always good news for the cement industry.

Last year as soon as the monsoon got over, cement companies increased the prices. While this is not unusual, as every year that happens, what was unusual was the quantum of rise and the fact it just came within a week of the monsoon getting over and then again, a few days later there was another hike. All that we are seeing today in the cement industry, where they are able to raise the prices, without getting shouted upon, is because of the fact

ETMarkets.com

9 mins read, Last Updated:

Jun 10, 2024, 04:34:00 PM IST

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