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With its consistent demand and potential for value appreciation, the cement sector can be a reliable pillar in a diversified portfolio.
As the backbone of modern construction, cement takes centre stage in the post-monsoon months. Here’s why this period could be crucial for the sector’s performance.
Big boost from infrastructure projects
The government has ambitious plans for infrastructure, which directly boosts the need for cement. One key initiative is the Pradhan Mantri Awas Yojana (PMAY), which is all about affordable housing. This initiative alone has a huge demand for building materials, especially cement.
Consider the Mumbai-Ahmedabad Bullet Train Corridor: this single project is consuming a staggering 20,000 cubic meters of cement each day—equivalent to constructing several skyscrapers daily.
Mega projects like these keep the cement industry in high gear, driving demand as the dry season unfolds and cement trucks continue rolling steadily across the country.
Cement giants set for expansion
The big players in the cement industry are actively ramping up capacity to meet it head-on.
Shree Cement has committed ₹2,000 crore (around $240 million) to expand production in Uttar Pradesh, while Ramco Cements is strengthening its Andhra Pradesh operations with a ₹1,403 crore ($168 million) investment.
The Adani Group, with ACC and Ambuja Cements, and JSW Group are also accelerating their expansion plans to handle the anticipated demand. Rumor has it that JSW Cement has been planning an IPO to raise ₹4,000 crore ($475 million), positioning itself strongly for the sector’s growth trajectory.
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Performance of cement stocks against Nifty50 (Source: Investing.com)
The recent underperformance of cement stocks relative to the Nifty50 can be attributed to the seasonal slowdown in demand during the monsoon season. As India transitions from the monsoon period into the festive season, typically marked by increased construction activity, the underperformance of these stocks presents a potential opportunity for investors.
With the monsoon’s end in October and the subsequent rise in demand, cement stocks are poised for a potential uptick, making them a compelling investment choice.
Cement stocks watch
Here’s a quick snapshot of a few potential stocks you might be interested in if you are considering investing.
Ramco Cements
Source: Investing.com
Ramco Cements hit a peak of ₹1,050 earlier this year but has seen a decline since. The stock recently dipped below its long-term 200-day moving average in early 2024, but the tide is turning as the stock price convincingly trades above the average.
Also read: Ramco plans ownership makeover of cement-to-textile group
With the price trending around the multiple highs near ₹900 and the support zone placed at ₹750, the break above the range can potentially take the stock back into the four-digit league.
Prism Johnson
Source: Investing.com
A star performer in the cement space as the stock price has rallied over 100% between October 2023 to September 2024. Post the rally, the stock price is into the breather mode. The strong support is placed at ₹160, and it wouldn’t be surprising to see it take off again towards new heights.
For momentum-focused investors, this cement stock is one to keep on your watchlist.
HIL
Source: Investing.com
HIL had a rough patch after peaking in 2021, dropping quite a bit, but it’s starting to stabilise.
Also read: These three companies are growing profits the fastest—is it too late to buy?
Technically, when a stock price repeatedly tests a support level and sustains above it, it often signals a bottom formation. This pattern is evident in the case of HIL. If the stock maintains its position above the ₹2,500 level, it could emerge as a promising investment opportunity within the cement sector, making it a potential addition to investors’ watchlists.
Will interest rates give cement a helping hand?
Another factor to consider: global interest rates are on the decline, and there’s potential for the Reserve Bank of India (RBI) to follow suit. If RBI lowers rates, borrowing costs drop, which could accelerate funding for large-scale infrastructure projects—a big win for the cement sector.
For more such analysis, read Profit Pulse.
For cement companies, lower interest rates could mean more projects coming their way. And for investors, this could mean cement stocks are set to gain some momentum.
Big picture
Cement stocks could be an interesting addition to your watchlist as we move into the demand period.
So, as skies clear and construction trucks get moving again, keep an eye on cement. This could be potentially the right time to tap into India’s post-monsoon construction wave!
Also read: Renewable energy is starting to shrink the power bills of cement, metal firms
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
As per Sebi guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
Kiran Jani has over 15 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face on the business channels as Market Experts and has worked with Asit C. Mehta, Kotak Commodities, and Axis Securities. Presently, he is Head of the Technical and Derivative Research Desk at Jainam Broking Limited.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
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