At a time when economic growth in China is sluggish and there is slowdown in developed economies such as the US and Europe, India has managed to beat them and grow at the fastest pace.
In his policy statement on Friday, RBI Governor Shaktikanta Das said, “India is poised to become the new growth engine of the world.”
For equity market investors, this statement further strengthens the case for raising bets on domestic-growth oriented sectors. In the last 1-2 years, investors, be it domestic or foreign, upped the ante on the India growth story, which saw stocks across manufacturing, capital goods, consumer goods, defence, and services give stellar returns.
Strong support from government capex has ensured sustained momentum in investment activity. Further, private sector capex is also gaining ground, as indicated by the expansion in production and imports of capital goods.
Data released by the government showed that growth in the output of 8 core industries surged to a 14-month high of 12.1% in August.
Meanwhile, the high frequency indicators pointed to buoyancy in the services sector activities. Thi growth in both manufacturing and service sectors reflects in stock prices, as the S&P BSE Auto, Capital Goods, Fast Moving Consumer Goods, Industrials, and Telecom indices have given 14-48% returns year-to-date, compared with the 8% returns given by the Sensex.
The capital goods sector has seen unperturbed inflows from foreign investors for 8 consecutive months, driven by the robust outlook for infrastructure, healthy order pipeline, and increasing progress on Make in India initiatives.
In the eight months to September, the sector has seen cumulative inflows of Rs 33,930 crore from FPIs.
“India’s macros are steady and there is enough traction seen in the government capex over the last few years. This should mean good traction for the industrial, capital goods and power sector,” said Meeta Shetty, fund manager at Tata Asset Management.
The capex announcements made by corporate India was 2.5x higher in FY23 versus the last few years. And, the manufacturing set-ups driven by China+1 opens multiple opportunities across the manufacturing sector, she said.
Giving further impetus to the domestic growth was the strategic partnerships that India forged at the recently concluded G20 meet.
As India is at an inflection point, in terms of economic growth and future dominance, it will remain a key investment destination for foreign investors.
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