Indian Cement Sector Outlook Q3FY26: Growth Drivers, Risks, and Top Stock Picks
Indian Cement Sector Outlook Q3FY26: If you are planning to invest in companies related to the cement industry, this analysis can be highly useful for understanding upcoming trends. According to a recent sector preview released by Axis Securities, the Indian cement sector is expected to maintain strong momentum during Q3FY26. The report highlights demand trends, pricing expectations, cost dynamics, and preferred stocks from a medium- to long-term investment perspective.
Cement Sector Q3FY26 Preview by Axis Securities
Axis Securities expects the cement sector to continue delivering healthy volume growth in Q3FY26. The primary factors supporting this outlook include sustained housing demand and continuous government spending on infrastructure development. Based on brokerage estimates, cement demand for covered companies may rise by nearly 11 percent on a year-on-year basis during the quarter. Infrastructure projects and affordable housing initiatives are expected to remain the key contributors to this growth trajectory.
The report indicates that public sector infrastructure spending, road construction, metro rail expansion, and urban redevelopment projects will keep cement consumption elevated. At the same time, affordable housing schemes are supporting steady offtake across multiple regions, ensuring balanced demand growth.
Rural Versus Urban Demand Trends
Rural demand is expected to outperform urban markets during Q3FY26. Favorable monsoon conditions and an increase in rural wages have strengthened purchasing power in non-urban areas. This has resulted in better construction activity, particularly in individual home building and small-scale projects.
In contrast, urban housing demand has shown relatively slower growth due to delayed launches of new residential projects and cautious buyer sentiment in certain metropolitan areas. Despite this, overall sector activity remains strong. Government data shows that cement production during October–November 2025 recorded a year-on-year increase of around 9 percent, reflecting robust operational performance across the industry.
Impact of GST Reduction on Cement
Axis Securities believes that the reduction of GST on cement to 18 percent could prove structurally positive for the sector over the long term. Lower taxation is expected to reduce the overall cost of construction, especially for first-time homebuyers. This change could significantly boost demand in tier-2 and tier-3 cities, where price sensitivity is higher.
The brokerage estimates that the GST cut may lead to savings of approximately ₹30–35 per bag of cement. This reduction is likely to support higher volumes and may also benefit premium cement brands by improving affordability and widening their customer base.
Cement Demand and Pricing Outlook for FY26
For the full financial year FY26, cement demand is expected to grow in the range of 7 to 8 percent. However, due to increased competition and the addition of new production capacities, cement prices may witness slight pressure in Q3FY26. The report suggests a possible price correction of 1 to 2 percent during the quarter.
Despite this temporary softness, prices are expected to recover in Q4FY26 with the onset of the peak construction season. Higher activity levels and improved demand-supply balance during the final quarter of the financial year could support better realizations for cement manufacturers.
Input Cost Trends and Profitability
Input costs remain a crucial factor for cement companies. Currently, prices of key raw materials such as coal and petcoke are under control, providing relief to operating margins. However, any sharp increase in these input costs could pose a challenge for the sector.
Even with these potential risks, Axis Securities expects EBITDA per ton for covered companies to improve on a year-on-year basis in Q3FY26. Operational efficiencies, cost optimization initiatives, and improved scale are expected to help companies maintain profitability despite moderate pricing pressure.
Overall Industry Outlook
The overall outlook for the Indian cement industry remains positive, supported by multiple structural and cyclical factors. Continued infrastructure spending, steady housing demand, lower GST rates, and ongoing industry consolidation are creating a favorable environment for long-term growth.
Consolidation within the sector is also helping larger players strengthen market share, improve pricing power, and enhance operational efficiency. This trend is expected to support stable earnings growth for leading cement manufacturers over the coming years.
Axis Securities Top Cement Stock Picks
Axis Securities has identified UltraTech Cement, Dalmia Bharat, and JK Lakshmi Cement as its preferred picks within the cement sector.
During early afternoon trading, shares of UltraTech Cement were up by around 1.59 percent, while Dalmia Bharat and JK Lakshmi Cement recorded gains of approximately 0.22 percent and 0.14 percent respectively. This positive movement reflects investor confidence in the sector’s growth prospects and the strong positioning of these companies.