As cement prices rise across India, driven more by the manufacturers’ need to prevent losses, analysts are sceptical if these prices can be sustained as supply is outstripping demand.
One analyst tracking the sector said: "The increase in prices in not mainly demand driven, it is an indication by the companies that they don’t want to make losses. This strategy has been tried 10 years back in 2001 and they are doing it again. Though for the second quarter we see some south-based companies posting losses."
A report by J Radhakrishnan of IIFL, said: "Our interactions with cement dealers indicate that demand from the infrastructure segment continues to be sluggish across regions. Dealers also fear a slowdown from the urban housing segment, given the sharp increase in real estate rates in the past few months." Though prices have seen an increase of `70 per 50 kg bag in the South and an average `15-25 across all markets, a few analysts say that if prices sustain the books of cement companies would be better off.
An analyst said, "Buyers are sitting at the fence. Also, our interaction with dealers indicate that cement manufacturers are holding supplies. Though cement stocks have run up in the wake of price hikes, investors should book profit and exit as this is not a long-term story to depend upon."
Source: DNA - Daily News & Analysis