Why is it that cement companies are literally taking it on their chin in the equity markets?

It looks like most cement companies are going through one of their toughest phases in recent years. Of course the pressure on the bottom line has already been there due to pressure of operating costs in the form of input costs, power costs, freight costs etc. But a much bigger trigger for the fall in cement company prices came after the announcement of capacity expansion by Ultratech Ltd, part of the Aditya Birla group and the biggest cement manufacturer in India in terms of installed capacity of cement.

While the spike in cost of inputs, power and freight is a reality, the capacity expansion opens up a new problem. It is expected that the supply glut would only diminish their pricing power further. Among the stocks to touch 52-week lows were Shree Cement, Grasim Industries, Birla Corp, Dalmia Bharat, Ultratech, and JK Cements. This crack came after Ultratech laid out aggressive plans to invest up to Rs12,886 crore to enhance capacity from 119.50 MTPA to 159.25 MTPA. This is to take on the Adani aggression in cement space.