Cement shares witnessed a strong rally on Wednesday with the Nifty Cement index gaining 1.3% to 15,057.10 at 12:07 PM, significantly outperforming the broader market which declined 0.24%. According to Business Standard, Prism Cement and Dalmia Bharat rallied 5% each in intra-day deals, while Ramco Cement, Shree Cement, Orient Cement, ACC, Ambuja Cement, JK Cement, Birla Corporation, India Cement, and UltraTech Cement were up in the 2-3% range. The rally was driven by expectations of improvement in operational performance, with cement companies' Q1 earnings broadly surprising on the upside due to stronger-than-expected volume growth and better cost performance.
However, the sector has since retreated significantly, with the Nifty Cement index falling as much as 1.3% to hit an intraday low of 14,915.05 on August 27, compared to the previous session's closing of 15,105.60. At around 2:56 PM, the index was trading lower by 1.15% or 173 points to trade at 14,932.60. About 13 out of the 16 stocks that constitute the index declined, while the remaining three advanced. The top losers included Ramco Cement, Orient Cement, Shree Cement, ACC Ltd and Ambuja Cement, while Nuvoco Vistas Corporation, JSW Cement and UltraTech Cement were the top gainers. The index has lost 3% over the month and 7% in the past six months, with a nearly 10% decline on a year-to-date basis.
Global brokerage firm CLSA continues to prefer UltraTech Cement, Shree Cement, and Dalmia Bharat among large-cap cement stocks, with Shree Cement offering the highest potential upside of 26.6% based on CLSA's latest target price of ₹30,500 (raised from ₹29,000). As reported by The Financial Express, the brokerage's channel checks indicate that demand remains resilient despite the seasonally weak period, with cement demand growing 6-8% across most regions helped by below-normal rainfall and continued construction activity. The latest market rally reflects investor confidence in these preferred stocks, with CLSA noting that capacity expansion deferments by larger industry players (excluding UltraTech) continue to be constructive for the sector as companies shift their focus towards improving utilisation and returns on existing assets.
Ramco Cement shares dropped as much as 5.3% to hit an intraday low of ₹891.10 on August 27 as investors booked profits, though the stock was trading 4.61% lower at ₹897.25 per equity share at the time of writing. The company recently notified exchanges that it will no longer be required to pay ₹160 per limestone towards Mineral Bearing Land Tax, with effect from August 22, 2026. The Mines and Minerals (Development and Regulation) Amendment Act, 2026 (MMDR) was enacted on August 13, providing restrictions on the imposition of levies on mineral rights or mineral-bearing lands. The company had been incurring ₹160 per tonne of limestone towards Mineral Bearing Land Tax in Tamil Nadu and expects this cessation to result in a corresponding reduction in operating costs with a favourable impact on profitability and cash flows.
However, profitability is likely to come under pressure in Q2FY27, amid higher fuel costs, weaker volumes and negative operating leverage. According to CLSA's analysis, the challenging operating environment is expected to impact sector performance in the near term. The brokerage expects EBITDA per tonne to decline in Q2 due to negative operating leverage, before a sharp recovery in the second half if fuel costs remain benign and competition eases. CLSA expects profitability to improve in H2FY27 as competitive intensity eases and fuel costs remain benign, with the MMDR Amendment Bill potentially being positive for companies with greater exposure to states where additional mineral-related charges had previously affected profitability. The latest data shows that near-term profitability remains under pressure as companies face ₹70-150/tn of additional costs quarter-on-quarter from fuel, diesel, maintenance, and operating deleverage.
Separately, JM Financial noted that capacity expansion deferments by larger industry players, excluding UltraTech, remain constructive for the sector. The brokerage expects profitability to improve meaningfully in H2FY27, supported by a likely recovery in cement prices, moderation in input costs and stronger operating leverage. However, elevated fuel costs and weaker operating leverage are likely to keep industry margins under pressure in Q2FY27. The latest data shows that average realization of the coverage universe improved by 3.6% QoQ, as cement price hikes were well absorbed in the market, though average EBITDA/ton was lower by 9.2% YoY to ₹1,031/ton in Q1FY27 due to higher fuel costs. Going forward, overall operational performance is expected to recover from H2FY27 onwards led by better volume growth, firm pricing, and operational efficiency measures.
