The Indian cement sector is showing nascent signs of a pricing recovery, particularly in South India, as companies shift their focus from volume growth to maximizing value. While demand remains broadly in line with expectations, a degree of pricing discipline is returning to the market, offering a potential boost to profitability after a period of pressure.
According to Jashandeep Singh Chadha of Nomura, the fourth quarter is traditionally a period focused on increasing sales volume, making sustained price increases challenging. However, price declines following Goods and Services Tax (GST) cuts were more pronounced than anticipated in South and East India. “The industry attempted price hikes in January, and February. In February, ₹15-20 price hikes were announced, out of which ₹10 have sustained. This is a positive step for South India,” Chadha said.
The current demand environment is described as “strong as usual” for the fourth quarter, but without any significant acceleration. Chadha emphasizes that the recent price adjustments are largely driven by major players seeking to maintain margins and operate from a lower cost base. This suggests a strategic move towards profitability rather than simply capitalizing on surging demand.
FY27 Outlook: Value Over Volume
Looking ahead to fiscal year 2027, the industry’s strategic direction is clearly shifting. Management teams are increasingly prioritizing value over volume, a change that could underpin more sustainable price gains. Chadha anticipates potential price increases of ₹40-50 per bag in South India in April-May, a substantial increase compared to the ₹10-15 increases seen in recent periods.
This shift in strategy comes as the sector anticipates a revival in rural demand, which is expected to be a key driver of volume growth in the coming year. “Rural revival is key. We expect FY27 volume to be 7-8% higher than FY26,” Chadha stated. While potential delays in state and central government capital expenditure (capex) could pose a headwind, the anticipated recovery in rural areas is expected to largely offset these concerns.
The cement sector’s performance has been closely tied to government spending. Data indicates that while central government capex declined sharply (around 25% year-on-year in January 2026), and central public sector enterprise (CPSE) capex plunged even further (around 40% year-on-year), state government capex remained supportive, expanding by approximately 15% year-on-year in December 2025. For the period April-December 2025, both central and state government capex increased by around 15% year-on-year, although CPSE capex saw a marginal decline of around 2% year-on-year.
Consolidation and Long-Term Prospects
Over the next three years, Chadha forecasts a significant improvement in both volume and value for the cement industry. He believes that ongoing consolidation within the sector, coupled with strengthening pricing power, will lead to substantially better financial results than those observed in fiscal years 2025 and 2026.
The positive outlook for the cement sector is further supported by a recent report from Nuvama, which highlights healthy demand trends, improving prices, and increased capital expenditure allocation in the FY27 budget as key drivers of growth. The report noted that cement demand and prices showed improvement in January 2025, indicating strengthening momentum.
Despite a relatively weak real estate market – with launches down around 9% year-on-year in calendar year 2025, following a 7% decline in 2024 – the overall cement demand outlook remains positive. Nuvama suggests that demand will remain healthy in the fourth quarter of fiscal year 2026.
The broader economic context also supports a cautiously optimistic view. On , the Sensex closed at 81,972.63, down 1.58%, while the Nifty 50 finished at 25,340.00, a decrease of 1.45%. Despite this market correction, the anticipated recovery in the cement sector, driven by pricing discipline and rural demand, positions it as a potentially resilient segment of the Indian economy.
The return of price discipline, combined with the expected recovery in rural demand, suggests that the cement sector may finally be poised for a sustained period of both volume growth and improved profitability. This positive trajectory is contingent on maintaining pricing power and capitalizing on the anticipated upturn in rural economic activity.
