New Delhi
Elara Securities reports a moderation in new capex activity over the next six months due to the busy elections season. New project data indicates a slowdown in order inflow momentum for large projects, particularly in capital goods, railways, and roads sectors. Management commentary from companies post Q2FY24 results supports the observation of a loss in pace in awarding orders. In the capital goods sector, growth in inflows decelerated to 39% in Q2FY24 from 62% in Q1FY24 and 65% in Q4FY23. In the infrastructure space, excluding L&T, cumulative order inflow declined 27% YoY in H1FY24. The Ministry of Roads & Highways spent 64% of the budgetary allocation up to October 2023, but new project awarding activity fell 48% YoY to 2,595 km. With significant spending lined up in rural India and the agriculture sector, including a likely hike in PM Kisan amounts and higher MGNREGA allocation, along with freebies announced in Assembly Elections, focus is shifting to election preparedness and related spending. This has led to a delay in new ordering activity by the government and a wait-and-watch approach by the private sector. Further moderation in order inflow momentum is expected, particularly in infrastructure spending in railways and metros, power T&D, renewables, wastewater treatment, and the civil sector. However, the water sector may buck the trend due to spending on last-mile delivery schemes such as the Nal Se Jal Scheme under the Jal Shakti Ministry, enhancing positive sentiments before elections. The water sector is expected to remain in the fast lane in the run-up to the elections, countering the likely slowdown in other infrastructure areas.
