Infrastructure sector

Rising cost put pressures on margins. The construction business is very sensitive to input costs as they comprise around 80% of the total costs. The prices of bitumen, steel, oil and cement have blown through the roofs and have almost doubled in the last couple of years. Due to this the margins will be impacted to a large extent.

One more thing most of the stocks of the construction companies are owned by FII so now they are trying to exit the position thus creating a selling pressure on the stocks.

The raw materials cement and steel make upto 35% of the input cost in case of railways.
The government is planning to modify the way in price escalation clauses are built. Now instead of linking the price rise to WPI indices they have linked the price rise to prices published by the steel authority of India for the steel prices. In the future the same may be expected in order to prevent the contractors from bearing all the price increase pressure.