The Indian cement industry is set for a period of healthy demand in the first quarter of FY27, even though rising input costs threaten to weigh on overall profitability.

"We expect demand to be healthy in Q1FY27E. We are neutral on the cement space in view of a likely hit to profitability despite cement price hikes," according to a sector update report by Nuvama Institutional Equities.

Despite a series of price hikes initiated in early April across various regions, the report maintained a cautious outlook on the sector's financial margins. The industry currently navigates a complex landscape where robust government infrastructure spending offsets a significant slowdown in the residential real estate market.

The report noted that the overall government capital expenditure, which includes central, state, and CPSE investments, surged approximately 26 per cent year-on-year to nearly ₹2.3 trillion in February 2026 alone. This momentum followed a more subdued performance in the previous fiscal year, with central government spending catapulting 60 per cent in February after consecutive declines in preceding months.

For the period between April 2025 and February 2026, total government capex reached ₹22 trillion, representing a 9 per cent increase over the previous year.

"Central government capex is up 14.5 per cent y-o-y in 11mFY26 (11 per cent y-o-y in FY25). Central government capex catapulted 60 per cent y-o-y in Feb-26 after having declined 25 per cent y-o-y each in Dec-25 and Jan-26. With the capex trajectory gaining momentum in Feb-26, higher capex allocations in the FY27E budget has raised hopes that FY27 demand will be better than in FY26," the Nuvama report noted.

However, the housing segment presented a stark contrast to the infrastructure push. Pan-India real estate launch volumes plunged 28 per cent during the January-February 2026 period. This continued a downward trend as launch volumes fell by 4 per cent in 2024 and 7 per cent in 2025.

Additionally, Nuvama's channel checks suggested that cement demand remained sluggish through March 2026 as unseasonal rains and labour shortages during the Holi festival impacted construction activity.

"Cement price hikes were witnessed in early Apr-26 across regions and dealers expect these to sustain given rising power/fuel and packaging costs," the report stated.

The pressure on margins stems largely from a significant spike in fuel prices. Petcoke prices climbed to $153 per tonne, marking an increase of approximately $41 per tonne since the third quarter of the 2026 fiscal year. The impact of these rising costs is expected to surface in company balance sheets starting from the second half of the current quarter.

While the industry saw a 9.3 per cent year-on-year increase in volumes in February 2026, reaching 44.9 million tonnes, the focus remains on whether price adjustments can outpace the rising cost of production. "We remain neutral on the cement space and believe stock prices will be determined by the trajectory of cement and petcoke prices going ahead," the report stated.

Published on April 18, 2026