Indian companies favor financial instruments over capital investment

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Indian companies have recently shifted their focus from capital expenditure to financial instruments like equity and debt securities. This change comes as market corrections have led to a slowdown in net fixed asset growth, which fell to 4.7% year-on-year by September 2024. Investment in financial instruments has seen double-digit growth, driven by weak consumer demand and ongoing global uncertainties. New private project announcements dropped over 10% in the last quarter of 2024, indicating a cautious approach to capital investments. As equity markets remain volatile, companies are increasingly turning to corporate bonds and debt mutual funds for stable returns. This trend reflects a strategic pivot towards financial prudence and liquidity, with expectations for a gradual recovery in capital expenditure dependent on improved domestic conditions.


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