<p>Even though the ongoing temporary shutdown in the wake of COVID-19 has impacted construction activities across the country resulting in a decline in cement uptake, the hit on domestic demand is transient, says Kotak Institutional Equities.</p>.<p>According to the domestic brokerage firm, novel coronavirus or COVID-19 led restrictions would dent cement demand from March 2020 onwards. However, it is expected to recover once normalcy returns.</p>.<p>"Historically, Indian cement demand has seen a weak correlation with global demand but a strong correlation with the domestic economy. Even as the restrictions have caused a dent, limited impact of COVID-19 in rural areas would partially cushion the near-term impact on domestic demand," it said in a report.</p>.<p><a href="https://www.deccanherald.com/national/coronavirus-live-updates-first-indian-army-jawan-tests-positive-all-his-colleagues-quarantined-799686.html" target="_blank"><strong>Follow live updates of coronavirus cases in India here</strong></a></p>.<p>The agency expects a 3-7 per cent year-on-year increase in demand in FY2021/22E as against 5-6 per cent earlier.</p>.<p>"We see the Indian cement sector better-placed than most in the current situation with drivers linked mainly to the domestic economy. Hit on domestic demand, if any, due to COVID-19, should be transient. Also, cost benefits from subdued commodity prices should offset any pricing-led pressure on margins," it said.</p>.<p>Cement sector is a direct play on the Indian economy with housing and infrastructure forming 85 per cent of the total demand.</p>.<p>"Further, the housing demand is dominated by rural housing, which is underpinned by government subsidy and agricultural income. Being a bulky commodity, the sector has negligible trade (both import and export) and largely a local play with a cement bag having an average lead distance of 300 km," it said.</p>.<p>The agency further said that cement forms 5-7 per cent of total cost of construction and demand is largely inelastic to prices.</p>.<p>"Prices, with a strong regional factor, are driven by discipline among regional players, market concentration and partially by regional demand-supply dynamics. Our channel checks with dealers suggest that all-India cement prices moderated by one per cent to Rs 349 per bag in March 2020 after a 6 per cent increase in January-February 2020," it said.</p>
<p>Even though the ongoing temporary shutdown in the wake of COVID-19 has impacted construction activities across the country resulting in a decline in cement uptake, the hit on domestic demand is transient, says Kotak Institutional Equities.</p>.<p>According to the domestic brokerage firm, novel coronavirus or COVID-19 led restrictions would dent cement demand from March 2020 onwards. However, it is expected to recover once normalcy returns.</p>.<p>"Historically, Indian cement demand has seen a weak correlation with global demand but a strong correlation with the domestic economy. Even as the restrictions have caused a dent, limited impact of COVID-19 in rural areas would partially cushion the near-term impact on domestic demand," it said in a report.</p>.<p><a href="https://www.deccanherald.com/national/coronavirus-live-updates-first-indian-army-jawan-tests-positive-all-his-colleagues-quarantined-799686.html" target="_blank"><strong>Follow live updates of coronavirus cases in India here</strong></a></p>.<p>The agency expects a 3-7 per cent year-on-year increase in demand in FY2021/22E as against 5-6 per cent earlier.</p>.<p>"We see the Indian cement sector better-placed than most in the current situation with drivers linked mainly to the domestic economy. Hit on domestic demand, if any, due to COVID-19, should be transient. Also, cost benefits from subdued commodity prices should offset any pricing-led pressure on margins," it said.</p>.<p>Cement sector is a direct play on the Indian economy with housing and infrastructure forming 85 per cent of the total demand.</p>.<p>"Further, the housing demand is dominated by rural housing, which is underpinned by government subsidy and agricultural income. Being a bulky commodity, the sector has negligible trade (both import and export) and largely a local play with a cement bag having an average lead distance of 300 km," it said.</p>.<p>The agency further said that cement forms 5-7 per cent of total cost of construction and demand is largely inelastic to prices.</p>.<p>"Prices, with a strong regional factor, are driven by discipline among regional players, market concentration and partially by regional demand-supply dynamics. Our channel checks with dealers suggest that all-India cement prices moderated by one per cent to Rs 349 per bag in March 2020 after a 6 per cent increase in January-February 2020," it said.</p>