Cement stocks were not spared on Monday by the general negative sentiment seeping into the market as a result of geopolitical tensions.

All four cement pivotals were in the negative - Gujarat Ambuja (down 2.06% to Rs 149.85), ACC (down 1.41% to Rs 142.90), L&T (down 1.41% to Rs 189) and Grasim Industries (down 1.15% to Rs 330) .

Cement scrips, in fact, should have been moving strong due to a recent hike in cement prices. However, prospects of a war in West Asia has proved the overriding sentiment of the day and no one is taking a call in the market for fear of the lack of tenacity in indices.

Besides the overwhelming concerns over war, reports that the Maharashtra government may withdraw concessions on stamp duty for non-delivery trades, which could push up transaction costs by a stiff 500% and a proposal by Sebi to debar FIIs from participating in trading through the participatory note route have further hampered the market. The latter move, has increased anxiety that FII activity itself will decrease. The market is also highly disturbed that UTI may embark on a selling spree over its maturing schemes.

Meanwhile, analysts feel that the cement industry should witness stellar growth in volumes in the months to come following sustained increase in construction activities. The thrust on infrastructure in the Union Budget will also boost cement demand further. The Centre has proposed Rs 60,000 crore (Rs 600 billion) in infrastructure projects in the Union Budget. In FY 2002-03, cement demand is expected to increase by a healthy 9.5%. Demand growth is expected to be the highest in the South (about 15%), followed by the North (9%), the West (6%) and the East (4%).

Demand continues to be driven by the Golden Quadrilateral road project and the sustained growth in housing construction activity.

Volumes continue to be strong for the cement sector. For the month of February 2003, the overall sector witnessed a 5.92% rise in dispatches to 9.3 million tonnes (8.78 million tonnes). Production rose by 5% to 9.32 million tonne (8.88 million tonne). For the first eleven months of the fiscal, cement despatches have risen 8.99% to 100.3 million tonnes (92.02 million tonnes) on a production increase of 9.14% to 100.47 million tonnes (92.05 million tonnes).

Analysts also believe that cement prices in the near term will increase. In the next three-four months, cement activities will be on the rise, as people will prefer to complete their construction projects ahead of the onset of the monsoon. This should also enable cement companies to pass on the hike in excise duty to the consumer (in the short term).

The Union Budget 2003-04 has prompted a Rs 50 per tonne - from Rs 350 per tonne to Rs 400 per tonne - rise in excise duty. Cement makers have hiked prices by Rs Rs 3-5 per bag in major markets - in a bid to pass on the burden to consumers. Already there is talk that cement makers are planning to further increase cement prices by Rs 10 per/bag in the coming days.

However, in the long-term, players continue to feel that cement prices will remain subdued till cement makers do not curtail production.

Meanwhile, analysts expect only a modest performance from cement companies for Q4 ending 31 March 2003 . The capacity expansions carried out over the last couple of years by most cement majors has created a supply overhang, thereby putting pressure on cement prices.