Comments
Foreign portfolio investors (FPIs) are increasing their bet on India’s capital goods sector amid early signs of revival in the capex cycle led by higher public capital expenditure and the crowding in of private investments.
According to depositories data, FPIs have infused a net investment of ₹14,912 crore in the capital goods sector and ₹5,541 crore in the construction sector between April 2022 and February 2023. Inflows into these sectors come even as FPIs remain net sellers in many of their favourite sectors, such as banking & finance, IT, and oil & gas, during this period.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said sectoral churns happen regularly in the market in response to changing prospects and performances of sectors.
He added that in 2020, pharmaceuticals were the best-performing sector, while IT services performed well in 2021 and the banking sector performed well in 2022. “Capital goods is likely to be one of the best-performing sectors in 2023.”
In the Union Budget 2023–24, the government increased capital expenditure outlays by 33 per cent to ₹10 lakh crore from ₹7.5 lakh crore in FY23. The Budget’s focus on infrastructure development through capital expenditure is expected to crowd in private investment and strengthen job creation and demand.
Capital goods stock rally
Higher earnings visibility and growth in order books have also led to a strong rally in the stock price of many of the capital goods companies as well as the capital goods index during the current fiscal.
For instance, from 58,568.51 points as of March 2022, the benchmark 30-share BSE index grew only by 0.67 per cent at the end of February 2023. On the other hand, the BSE capital goods index and the BSE industrials index grew by 23 and 24 per cent, respectively, during the same period.
Stock prices of some of the capital goods companies, such as ABB (49 per cent), Carborundum Universal (23 per cent) and Thermax (11 per cent), also gained during this period.
Other gainers
Healthcare and FMCG were the other major gainers, with net FPI inflows of ₹17,732 crore and ₹15,415 crore, respectively, during the first eleven months of FY23.
Vijayakumar said since the IT sector is facing a slowdown due to recessionary fears in the US and Europe, FPIs are focussing on domestic themes such as capital goods, FMCG, cement, and banking. “FMCG is always a defensive sector, which will do well in difficult times.”
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.