Cement demand and pricing improved in January 2026 despite continued weakness in the housing segment, supported by government capital expenditure and infrastructure projects, according to a report by Nuvama Institutional Equities.
The report noted that both demand and prices recorded improvement in January even as capital expenditure by the central government and central public sector undertakings declined on a year-on-year basis during the month. The resilience in demand is attributed to ongoing infrastructure activity.
Government Capex Trends in FY26
According to the report, while the pace of government capital expenditure moderated in FY25, spending has regained momentum in FY26. Between April and December 2025, capital expenditure by the central and state governments increased by approximately 15 percent.
The central government has budgeted capital expenditure of Rs 11.2 lakh crore for FY26, of which around 70 percent had been spent by December. The report stated that this indicates continued momentum in infrastructure projects.
For FY27, capital expenditure allocation has been increased to Rs 12.2 lakh crore, reflecting continued emphasis on infrastructure and construction activity.
Although spending by central public sector undertakings has seen a marginal decline, overall government investment remains supportive of cement demand.
Housing Segment Remains Under Pressure
The real estate sector continues to face pressure. New housing launches across the country declined by approximately 9 percent in 2025, marking the second consecutive year of decline.
Housing construction accounts for a significant share of cement consumption. However, increased activity in roads, railways, urban development and public projects has helped offset weakness in residential demand, resulting in steady overall demand for cement.
Demand and Pricing Outlook for Q4FY26
Channel checks by the brokerage indicate that cement demand remained firm in January and is expected to sustain in Q4FY26. The industry’s volume growth for FY26 is estimated to remain in the mid-single digits.
Prices had declined in October and November 2025 but began recovering from December. In January, several regions reported price stability and increases.
The report stated that softer fuel prices and cost control measures adopted by companies could reduce margin pressure. Sustained price stability may support profitability improvement.
Margin Trends and Cost Factors
Input costs, particularly coal and fuel prices, remain key determinants of margins for cement companies. Recent months have seen some easing in costs.
The brokerage stated that if demand remains firm and companies are able to maintain pricing discipline, operating margins may improve. It maintains a neutral rating on the sector while indicating constructive signals for the near term.
JK Cement Rated Top Pick
Within the sector, the brokerage has assigned a ‘Buy’ rating to JK Cement and identified it as its top pick. The report cited improving demand, price recovery and cost control as supporting factors. It also referred to the company’s regional presence and premium product mix.
The brokerage noted that stock selection within the sector should consider company fundamentals, debt levels and expansion plans.
