Indian companies favor financial instruments over capital investment

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.