Industrial cycle sees first signs of revival

September has been a good month for the capital goods and infrastructure sectors, with analysts seeing green shoots of recovery in industrial activity picking up slowly.

The first sign of revival has come from Larsen & Toubro's second quarter results, which showed a 30 per cent growth in order inflows.

The engineering and capital goods behemoth is virtually a proxy for these two sectors; so an uptick in its order book and robust execution shows some initial positive signals.

L&T's chief financial officer R Shankar Raman has conveyed to analysts that core infrastructure opportunities are driving order inflows.

He, however, has said while hydro carbon tendering is picking up, broad-based investment momentum in power and industrial capex is yet to pick up and the delay in investment decision-making also continues.

But there's no denying that things are not as bad as they were a year ago. For starters, tendering activity jumped in September, driven mainly by the government. The number of tenders published during the month grew 63 per cent month-on-month to 4,248 (up 94 per cent year-on-year).

Another indicator that suggests there is an uptick in activity in the infrastructure space is the steady demand for cement in several regions. Cement prices moved up 1.7 per cent in the month to Rs 299 a bag.

A monthly analysis done by Emkay Global shows that capital goods production has been largely stable, with muted growth on a sequential basis in August 2012.