Muted expectations and slow rural demand suggest earnings downgrade may continue: Ajay Bagga
«So, a bit of a problem on the capex side and maybe these were priced to perfection already, were not cheap and we are seeing a sell-off there that maybe it is a two-quarter catch-up that will happen and it is not going to happen in the next quarter,» says Ajay Bagga, Market Expert.
To the point that Vinay was also talking about, the crack in some of the industrial and capital good names. One would assume that around budget, there would be increased expectation of perhaps private capex picking up. First half was bad. Everybody was pinning hope on the second half of the year. What then explains this kind of sharp drops in the prices of capital good companies?
Ajay Bagga: I agree with you. Normally, with the budget coming up, we see railways, defence, infra, cap goods, all these stocks going up. So, today's move, I could not really tell you. But overall, the issue has been slow government orders and slow pickup in the private capex, that we have seen because demand has been quite constricted. We have seen private capex getting postponed as well.
And then as far as the government, as the biggest spender in the economy, they held back their hand and the infrastructure spending has not happened as per the budget and it has been quite slow. We lost about four months on the national elections. And the catch-up was expected for November, December but we have not seen that kind of huge orders being announced or tenders being issued.
So, a bit of a problem on the capex side and maybe these were priced to perfection already,
