Government spending is yet to pick up as much as it did in the previous cycle, according to Hiren Ved, Director and Chief Investment Officer at Alchemy Capital, even as he noted a critical factor influencing private capital expenditure and the broader economic landscape.
The September earnings have been disappointing, driven by a combination of a high base effect and an economic slowdown following the elections, Ved told NDTV Profit in an exclusive interview.
Government spending is currently running nearly 30% below budget, which raises concerns about the timing and impact of anticipated expenditures, he said. "Hopefully, we should see an acceleration post Maharashtra elections in November," he said.
While private capex is not stagnant, Ved observed that it is not prevalent in traditional sectors like power. “The nature of capex is changing; it's not as capital-intensive as it was earlier,” he said. He added that companies generate more cash than they spend on capital.
He also highlighted consumer behavior, indicating that the top 10% of India's population is spending like a developed nation. Despite this, Ved expressed reservations about large private banks and tech companies, while suggesting that there is still room for growth in the real estate sector. "We are still far from a bust in the real estate cycle," he said, while identifying the FMCG industry as ripe for disruption from quick commerce.
Looking ahead, Ved is optimistic about the future of the Indian market, stating, "I think we are at the dawn of creating digital giants in India." He cited ICICI Bank as a solid investment choice and mentioned a top position in one of the largest spirits companies, anticipating a rising trend for Indian whiskies.
While acknowledging the current slowdown, Ved views it as temporary and expects the fourth quarter to be particularly strong, as it is traditionally the best quarter. He said, “If the spending is in and around the budget itself, it's good enough. Capex is not absent; it's just not as capital-intensive as in previous cycles.”
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