New Delhi, June 18 -- India's cement sector is not a cheap bet on an absolute or relative basis. It trades at a one-year forward price-to-earnings multiple of 34x - a steep premium to some global counterparts.

The reading is higher than the sector's long-term average. The problem is that stocks of Indian cement makers have elevated valuation multiples despite subdued earnings. In fact, the Indian cement sector has seen large downgrades to consensus Ebitda and earnings per share estimates every year for the past 10 years, says Kotak Institutional Equities.

So, what is keeping valuations lofty? Two key narratives seem to fuel optimism.

A pick-up in government spending on infrastructure and allied activities in FY26 after a muted FY25 due...