Cement stocks in multi-year upcycle, says Harsha Upadhyay of Kotak MF

The cement sector and its stocks are in a multi-year uptrend as capacities in the space are not coming up fast enough to match incremental demand, Harsha Upadhyaya, chief investment officer at Kotak Mutual Fund told CNBC-TV18 in an interview on April 6.

Cement stocks have been in focus after companies announced successive price hikes over the past few weeks in the light of higher input costs.

“In cement (sector), the silver lining is the strength in demand despite sharp price increases,” Upadhyay said.

Analysts have been bullish on the sector on hopes of an uptick in demand due to the rekindling of the private investment cycle in the country led by the real estate space.

Upadhyaya, however, is not too optimistic about other sectors that have seen a surge in input costs driven by higher global commodity prices.

Commodity prices have risen sharply in the past month following supply concerns in the wake of stringent sanctions imposed on major producer Russia following the country’s invasion of Ukraine.

The asset manager said the March quarter earnings may not fully show the impact of recent spike in commodity prices. “In Q1, you will see an adverse impact on corporate margins. Also, in some cases we see some demand slack as well,” Upadhyaya said.

He said the financial services space is one of the few pockets of the market where valuations are in favour of investors. The fund manager expects the sector to see an upward revision in valuation multiple once credit growth starts improving.

Besides financials, Upadhyaya said the recent correction in pharmaceuticals and healthcare services stocks could provide a good opportunity for investors.

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