CLSA India says cement prices have started to drop across India, with dealers expecting more falls ahead, according to its India Reality Research survey.

Cement prices have fallen by an average of 2% per bag since 15 April, with dealers citing rising inventories, while demand is being hit by "sluggish" construction activity.

ACC has risen 6% in 2012, Ambuja Cements is down 4%, while Ultratech Cement is up 21% on a YTD basis, compared to 12.2% rise in Nifty.

The outlook for the sector is mixed, with demand expected to rise 7-8% as construction picks up on the back of falling interest rates but rising costs could force companies to increase prices.