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Industry slowdown, inflation push construction, realty scrips down
The slowdown in manufacturing and infrastructure segments coupled with higher inflation numbers hit engineering, construction and realty stocks.
The slowdown in manufacturing and infrastructure segments coupled with higher inflation numbers hit engineering, construction and realty stocks.
The impact of higher interest rates and anticipation of increasing bad loans pushed down these stocks by 5-10 per cent in the last two days.
“L&T indicated that given the recent rise in interest rates, a slowdown is imminent and that it was already visible in its product business in the first quarter of the current year,” said Enam Research in a recent report. “In the EPC business, the slowdown will impact order inflows with a lag of 6-8 months and hence revenues by 1-1.5 years.”
All major firms, including L&T and BHEL in the capital goods sector, infrastructure companies like GMR and Reliance Infrastructure and realty firms like DLF are down over 4 per cent on Thursday and was down over 7 per cent since Wednesday.
The reality index of the Bombay Stock Exchange was down by 7.9 per cent on Thursday to close at 5,163.5. Capital Goods sector also closed lower by 3.7 per cent to close at 12,552.4.
Analysts and brokers said slower industrial production figures and worries of higher interest regime brought down these stocks.
“There are rumours of inflation may go up further and many of the major banks may report a higher percentage of bad loans,” said Dev Kapadia, analyst, Lalkar Securities. “All these factors along with the lower prediction of economic growth hampered reality and construction stocks.”
Prime Minister’s Economic Advisory Council on Wednesday suggested that inflation might touch 13 per cent while the GDP growth rate is expected to slide to 7.7 per cent from the 9 per cent recorded last year.
Moreover, the index of industrial production (IIP) released on Tuesday revealed that industrial growth was down to 5.4 per cent from a high 8.9 per cent growth posted during the same month a year ago.
