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Nirmal Bang Report
Gross fixed capital formation touched 33.6% of gross domestic product in Q4 FY22, a level last seen in Q1 FY20. However, most evidence suggest that government is the key driver of this capex.
Most capex indicators are in positive territory driven by the government's capex push. But, a gradual pick up in capacity utilisation which touched 72.4% in Q3 FY22 along with a favorable real interest rate environment bodes well for the private corporate capex cycle.
Nevertheless, we do not anticipate acceleration in private corporate capex until such time capacity utilisation moves closer to 80%.
The government's capex push is supporting bank credit to the infrastructure sector, mainly roads. Road construction and awards hit a peak in March 2022.
Despite rising interest rates, we see real mortgage rates remaining at around the lowest levels since FY14, which along with improving affordability should continue to support the residential real sector.
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