Market Mania or Strategy Shift? Why Companies Are Holding Back on Investments

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Changing Investment Trends
Corporate capital spending (capex) has been slow on the back of robust balance sheets and increasing profits. Listed companies have restored their financial health, but investment as a share of GDP stagnates. Analysts attribute the solution to be found in stock market realities.

Market Impact on Capex Spending
Profits have doubled for listed companies in the post-pandemic era, but growth in capex is short of expectations.

The unlisted corporate segment, responsible for almost two-thirds of corporate value addition, has been grappling with shrinking market share and profitability.

Even with enhanced liquidity, companies are focusing more on shareholder returns than new investment.

Government and Private Sector Divide
Household and government investments have picked up, differing from corporate reluctance.

The government's capex allocation for FY26 is Rs 11.2 lakh crore, but private sector investment is subdued.

Market sentiment and investor expectations are shaping companies' spending behaviors, say experts.

Future Outlook
Analysts forecast that stock market multiples and investor pressures could be discouraging firms from investing in long-duration capex.

The ramp-up phase of current projects is now on the radar, as opposed to new infrastructure expenditure.

Institutional investors and policymakers are monitoring whether corporate investment cycles are likely to pick up in the next few quarters.

Sources: Moneycontrol, The Hindu BusinessLine, Screener.