The demand factor

Cement stocks have been the market's favourite sector for a number of years now. First, the election of the Modi government raised hopes that much of the policy paralysis linked to the previous government would be resolved and India would chart a new age of infrastructural development. Secondly, the new government's housing-for-all scheme kept those hopes high that cement demand would not only sustain but grow exponentially going forward. The anticipation of huge demand raised sector valuations from their average levels of 18.2x in the last decade to the current 30x (see Figure). The 10 most expensive large cement companies today trade at an average P/E of 58x, far ahead of the average of 17x these same companies were