Cement scrips recovered on Tuesday on bargain hunting, especially by operators, on hopes that these companies may bag fresh overseas orders after the ongoing US-Iraq war gets over.

ACC (up 1.60% to Rs 136.50), Gujarat Ambuja (up 0.54% to Rs 157.80) and Larsen & Toubro (up 0.16% to Rs 187.20) gained ground.

The recovery in these scrips was due to reports that cement makers will benefit after the war gets over as the reconstruction activity in Iraq will begin. Already, Gujarat Ambuja Cements has started receiving enquiries from cement importers in the Gulf region, as per reports.

Cement makers located in the west coast of India are expected to bag huge orders as they are best suited to supply cement to Iraq. Companies like Gujarat Ambuja Cements and Larsen & Toubro are major exporters of cement to the Gulf region and they already have distribution network there.

Dealers, however, said the cement scrips may not sustain their higher levels.

Analysts said the cement industry may witness a stellar growth in sales volumes in the coming months following the sustained increase in construction activity in India. The thrust on infrastructure in the Union Budget for 2003-04 may boost cement demand further. The Centre has proposed Rs 60,000 crore for infrastructure projects in the Budget. In FY 2002-03, cement demand is expected to increase by a healthy 9.5%. Demand growth is expected to be the highest in the South (about 15%), followed by the North (9%), the West (6%) and the East (4%). Demand continues to be driven by the Golden Quadrilateral road project and the sustained growth in housing construction activity.

For the month of February 2003, the cement sector witnessed a 5.92% rise in dispatches to 9.3 million tonnes. Production rose by 5% to 9.32 million tonne. For the first eleven months of the fiscal, cement dispatches have risen by 8.99% to 100.3 million tonnes on a production increase of 9.14% to 100.47 million tonnes.

Meanwhile, analysts expect only a modest performance from cement companies for Q4 ending 31 March 2003. The capacity expansions carried out over the last couple of years by most cement majors has created a supply overhang, thereby putting pressure on cement prices.