Overall govt capex rose 19% YoY in Apr-May 2026, boosting hopes for stronger cement demand in FY27 despite a weak housing sector, a Nuvama report said. CPSE capex surged 26% in Q1FY27, but cement demand and prices remain mixed regionally.
Govt Capex Fuels Cement Sector Optimism
Overall government capital expenditure by the Centre, states and central public sector enterprises (CPSEs) increased 19 per cent year-on-year in April-May 2026, raising hopes of stronger cement demand in FY27 despite mixed demand trends and continued weakness in the housing sector, according to a report by Nuvama.
The report said the capex trajectory, which remained subdued during FY25 and FY26, has shown improvement in the first two months of FY27, supported by higher public spending across different levels of government.
It noted that central government capex rose 13 per cent year-on-year in April-May 2026, while state government capex increased 9 per cent during the same period.
Capital expenditure by CPSEs, including departmental agencies, surged 26 per cent year-on-year to Rs 2.1 trillion in Q1FY27, while CPSE capex increased around 6 per cent year-on-year in June 2026.
Weakness in Housing Sector Persists
Highlighting the improving spending trend, the report said, "With capex trajectory being steady in May-26, the higher capex allocation in the FY27E budget has raised hopes that demand in FY27 would be better YoY." However, the brokerage pointed out that housing activity continues to remain weak.
According to the report, pan-India residential launch volumes declined 8 per cent year-on-year in FY25, 4 per cent in FY26 and 14 per cent year-on-year in April-May 2026, indicating moderation in real estate activity.
Mixed Trends in Cement Demand and Pricing
Demand trends in the cement sector also remained uneven in July due to the onset of the monsoon season. The report said demand was healthy in the West and South, but subdued in other regions.
Cement prices also showed mixed trends across the country. According to Nuvama, prices declined by around Rs 5 per bag in the West and Central regions, increased by around Rs 8 per bag in Hyderabad, and remained broadly stable in the North and East.
The report said, "Our channel checks indicate that demand trends are varied across regions in Jul-26 on account of onset of the monsoon season. Cement prices have also shown mixed trends with decrease in prices in western and central regions, rise in Hyderabad and being broadly stable in the North and East."
Input Costs and Future Outlook
On input costs, the brokerage noted that crude oil prices have eased from recent highs amid volatile geopolitical developments, but petcoke prices have not declined in the same proportion.
Petcoke prices are currently stable at USD 133 per tonne, up around USD 20 per tonne from Q4FY26 but down USD 35 per tonne from the recent peak of USD 168 per tonne.
Nuvama said the impact of higher input costs is likely to be reflected starting late Q1FY27 and Q2FY27, adding that input cost trends, cement prices and housing and infrastructure demand would drive stock prices going forward.
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