Ajay Modi / New Delhi July 17, 2008, 0:40 IST Apprehending a slowdown in demand from oversupply, institutional investors, particularly foreign institutional investors (FIIs) have pruned their stakes in top cement companies such as ACC and Ultratech over the last four quarters. The industry has started feeling the pinch of measures taken by the government over the last one and half years, aimed at bringing down cement prices and checking inflation. With new capacity additions and an anticipated slowdown in realty, the cement sector could be heading towards an oversupply by the year-end. "While FII selling has been witnessed across sectors, it has been higher in cement. These investors have sold heavily on anticipation of an oversupply. Continued government intervention and inability of companies to pass on the sharp jump in input costs have also contributed to this phenomenon," said Pawan Burde, a cement analyst at Angel Broking. Since January 2007, the government has taken several measures to check cement prices and control inflation. The latest restrictions were an export ban (which was later relaxed partially) and a 12 per cent ad-valorem duty on cement selling above Rs 250 per 50 kg bag. Last year, the government had made cement import duty-free. Cement has a weight of 1.73 per cent in the wholesale price index (WPI). Inflation, however, has continued to rise on high prices of minerals and food items. Inflation for the week ended June 28 was at a 13-year-high of 11.89 per cent. In the January-March quarter, while cement producers faced a 16 per cent cost-push on the input side, they could increase prices by 4-5 per cent only. Further on, prices will see a downward correction with new capacity additions hitting the market while cement may continue to underperform vis-a-vis the market, Burde added.