A report released by Deutsche Bank Markets Research has estimated that the cement industry is likely to witness 15-20 per cent demand dip until the end of this calendar year due to the BJP government’s decision to de-monetise the currency of higher denominations. The research firm also estimates that the cement sector might witness subdued growth of 3 per cent in Q4 of this fiscal.
The report says that investors believe that the drop in near-term demand is “likely to be severe”.
“The demand may see subdued 3 per cent growth in Q4FY17 and upturn is expected only in FY20 as compared to FY19 earlier,” said the Deutsche Bank Markets Research report.
“We see some infra sector demand offsetting weakness in demand from the housing segment. We may also see a gradual reduction in mortgage rates, which could bring back some genuine demand,” said Research Analyst Chockalingam Narayanan.
“Looking at the demand-supply model, we expect the regional balance to first shift in favour of northern and central India. Eastern India is likely to see the largest reduction in utilisation over the next 12-18 months,” he added.
However, the cement sector is hopeful that infrastructure projects will offset the weakness in the realty sector.