Cement stocks gain up to 4% as govt hikes housing scheme outlay in Budget

Finance Minister Nirmala Sitharaman on Wednesday announced to increase the outlay for Pradhan Mantri Awas Yojana by 66% to Rs 66,000 crore, which will be positive for cement companies.

Further, Sitharaman has also announced to increase FY24 capital outlay by 33% to Rs 10 lakh crore. Shares of cement companies zoomed up 4% following the announcements.

At the bourses, India Cements rallied the most at 3.78% while Ramco Cements was up 2.38%, Shree Cements gained 2.70% and Ultratech Cement surged 1.04%.

The announcements failed to cheer both Adani group companies in the cement space -- ACC and Ambuja Cements -- as the shares were down over 3% each in afternoon deals on NSE.

Pradhan Mantri Awas Yojana is an initiative by the government under which affordable housing will be provided to the poor.

"Higher government focus on building infrastructure including roads, airports, ports, bridges and other hard structures will increase overall cement demand. Increased allocation of funds to government schemes like Pradhan Mantri Awas Yojna will enhance cement consumption further," Axis Securities said.

The capital investment outlay in the current Budget is almost three times the outlay in 2019-20.

"This substantial increase in recent years is central to the government’s efforts to enhance growth potential and job creation, crowd-in private investments, and provide a cushion against global headwinds," Nirmala Sitharaman said.

The direct capital investment by the Centre is complemented by the provision made for creation of capital assets through grants-in-aid to states. Hence, the effective capex of the Centre is budgeted at Rs 13.7 lakh crore, which will be 4.5% of GDP.

Overall, markets cheered the Budget with the Sensex rallying over 1,200 points, but euphoria fizzled out. Sensex was last trading off the day's high at 59,736 points, just 186 points higher than its previous close.

"The budget has delivered on all the expectations very well. In the short term, we expect the markets to move higher on the back of pro-growth measures announced in the budget and less fear of the government crowding out private investments due to fiscal prudence shown by the government," said B Gopkumar, MD & CEO, Axis Securities.