Indian Stock Market News, Equity Market and Sensex Today in India | 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?  

Factors influencing the capex cycle
Wed, 27 Jul Pre-Open

Interest rate policy is a prime indicator of the way the investment/capex cycle moves. Higher interest rates deter investments thereby impacting growth in the near term. On the other hand lower interest rates encourage investments in physical infrastructure. This not only increases consumption (through increased output) but also generates capital for future growth. Hence, a loose monetary policy is effectively required to boost investment and growth.

However, with inflation being above the comfort zone RBI has been raising rates a number of times (50 bps hike undertaken yesterday). As a result, the investment/capex cycle has virtually come to a standstill. However, consumption has been on a steady rise. Rising consumption in absence of investments (higher interest rates) has further stoked inflation. Rising inflation would mean interest rates will increase further. And higher interest rates prove to be a gross disincentive for future investments. As you can see this interest rate-investment cycle is quite vicious one.

So, apart from lowering rates (not a possibility in the near future), what exactly needs to be done to encourage investments in physical infrastructure? We believe that one of the most important factors that influence's capex cycle is - policy roadmap. Recently, land acquisition issues and environmental concerns have impacted execution of various projects. And this in turn has delayed the capex cycle. Unless, these policy issues are addressed the investments would continue to suffer.

Another way to encourage investments is to award incentive packages. In the past, quite a few industries like IT (tax exemption for ITES services) and Textile (Technology Up-gradation Fund) have received such benefits. Providing subsidy in the form of lower interest rates or taxes to priority sectors is another option. We believe that these options could well prove to be viable considering that inflationary environment ensures interest rates would remain high. However, we are well aware that reform process in India is quite lengthy. Even incentivizing a few sectors has to be done after keeping in mind the fiscal goals as subsidies are effectively borne by the government.

Hence, unless the rate cycle softens we do not think the capex cycle would take any meaningful turnaround in the near future.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Factors influencing the capex cycle". Click here!

  

Stock Market Updates

Sensex Ends 296 Points Higher; Coal India, UPL & Hindalco Surge Over 6% (Today's Market)

May 10, 2021 Closing

Indian share markets ended on a positive note with the Sensex up by 296 points and the Nifty ending up by 119 points.

GRINDWELL NORTON at All Time High; BSE CAPITAL GOODS Index Up 2.1% (Today's Market)

May 10, 2021 01:12 PM

GRINDWELL NORTON share price has hit an all time high at Rs 1,142 (up 6.1%). The BSE CAPITAL GOODS Index is up by 2.1%. Among the top gainers in the BSE CAPITAL GOODS Index today are GRINDWELL NORTON (up 6.1%) and HONEYWELL AUTOMATION (up 0.4%). The top losers include AIA ENGINEERING (down 0.2%) and SOLAR INDUSTRIES (down 0.2%).

Sensex Trades Over 300 Points Higher, Dow Futures Up by 86 Points (Today's Market)

May 10, 2021 12:30 pm

BSE Sensex is trading up by 379 points, while the NSE Nifty is trading up by 131 points.

GE T&D INDIA Share Price Up by 5%; BSE CAPITAL GOODS Index Up 1.5% (Today's Market)

May 10, 2021 10:28 AM

GE T&D INDIA share price is trading up by 5% and its current market price is Rs 128. The BSE CAPITAL GOODS is up by 1.5%. The top gainers in the BSE CAPITAL GOODS Index are GE T&D INDIA (up 5.3%) and GRINDWELL NORTON (up 5.8%). The top losers are SCHAEFFLER INDIA and THERMAX (down 0.2%).

Sensex Opens 350 Points Higher; Dr Reddy's Lab & Tata Steel Top Gainers (Today's Market)

May 10, 2021 09:30 am

Indian share markets continue momentum. The BSE Sensex opened up by 352 points, while the Nifty is trading higher by 120 points.

CADILA HEALTHCARE at All Time High; BSE HEALTHCARE Index Up 1.9% (Today's Market)

May 10, 2021 09:58 AM

CADILA HEALTHCARE share price has hit an all time high at Rs 625 (up 3.4%). The BSE HEALTHCARE Index is up by 1.9%. Among the top gainers in the BSE HEALTHCARE Index today are CADILA HEALTHCARE (up 3.4%) and ABBOTT INDIA (up 1.0%). The top losers include J.B.CHEMICALS (down 0.4%) and GSK PHARMA (down 0.4%).

View More Indian Share Market News

Most Popular

The Next Smallcap Winners(Profit Hunter)

Apr 30, 2021

Price is the only due diligence one might require to buy this business.

Time to Buy Smallcaps?(Fast Profits Daily)

Apr 30, 2021

In this video, I'll show you why I favour smallcaps over the Nifty.

Sell in May and Go Away?(Fast Profits Daily)

Apr 28, 2021

Does the concept of selling stocks in the month of May, work in the Indian market?

Are the Stock Markets Deaf to Covid Agony?(Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


May 10, 2021 (Close)

MARKET STATS