Why cement stocks are rising despite India’s construction boom

Cement may be tied to India’s construction story, but the sector is currently missing from the market’s list of favourites. Veteran investor Nischal Maheshwari says the reason is straightforward: even as building activity remains strong, excess capacity and fierce competition are preventing companies from translating demand into pricing power.

That disconnect is becoming more visible at a time when investors are rotating toward sectors with clearer earnings triggers. In Maheshwari’s view, cement is simply not offering that setup right now.

Construction boom, but no pricing spark

The paradox is hard to miss. India continues to see activity across infrastructure, housing and industrial construction, yet cement stocks have not generated the kind of excitement seen earlier in metals or in select financial and consumption plays.

Maheshwari argues that the market’s indifference stems from industry structure rather than demand destruction. “This current quarter is going to be a monsoon quarter, so not much of excitement there,” he said, flagging the seasonal slowdown that typically weighs on dispatches and sentiment.

Overcapacity keeps the lid on margins

The bigger issue, however, is supply. According to Maheshwari, “there’s an overcapacity in the system,” which is limiting the sector’s ability to benefit from the broader construction cycle. In commodity businesses such as cement, surplus capacity often translates into weaker realisations, even when volumes remain healthy.

Capacity additions and competitive intensity are keeping prices subdued, reducing the earnings surprise that the Street typically looks for.

Consolidation battle turns more aggressive

Maheshwari also pointed to a sharper competitive battle among leading companies. “There are two, three now aggressive players basically, which are consolidating and aggressively growing and trying to figure out who’s going to be number one,” he said.

That race for scale may strengthen long-term industry leadership, but in the near term it is creating pressure on pricing discipline.