Economy: Trend in investments - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Economy: Trend in investments

Feb 24, 2009

Liquidity is a major concern corporate India is facing in present times. In addition, there are issues related to future demand and increasing inventory buildups. Delayed payments from customers leading to increasing working capital cycles have led companies to increase their debt (for working capital) levels in order to manage daily operations. Liquidity and capital raising issues have led companies to think twice about their expansion and capex plans. Over the past few quarters, we have seen a drastic change in the nature of investments within the country as compared to the earlier high growth period.

While the growth in number of new projects has been slowing, the average size and value of these projects has been growing. Similar has been the case with projects that have been shelved. As we can see from the table below, post September 2007 the number of projects that have been shelved has shot up.


(Source: CMIE)

(Source: CMIE)

The reasons behind the slowdown in allocation of new projects and shelving of older ones can be attributed to the overall economic slowdown and fund raising issues. According to the Centre for Monitoring Indian Economy (CMIE), only a few projects were stalled due to other reasons like delay in government clearances, court cases or problems related to land acquisition.

Some positives to point out
If we consider the total number of outstanding investments, it wouldn't seem as if the country is going through a slowdown. Especially when compared to the previous year. The total number of outstanding investments at the end of December 2008 stood at Rs 80.7 trillion, higher by 41% YoY as compared to the total outstanding investments at the end of December 2007.

Conclusion
We believe the real impact of the economic slowdown globally and in India is likely to hit Indian infrastructure sector and related companies going forward. While we may see more projects going on hold rather than being shelved, as per our understanding in management interactions, it seems as if execution of these projects will be extended so that companies can curtail the impact of the slowdown.


Equitymaster requests your view! Post a comment on "Economy: Trend in investments". Click here!

  

More Views on News

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

3 Rebirth of India Opportunities Are Racing Ahead in These Gloomy Times... (Views On News)

Jun 28, 2019

Tanushree Banerjee shares an update on the Rebirth of India and reveals her top 3 trends...

More Views on News

Most Popular

India in Crisis

Here we highlight the crisis scenarios that India could face. The worry is that there aren't really any easy solutions in sig...

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS