Lookback Archive / Sector Cycle
Lookback: How India's capital-goods orderbook swelled and stalled through 18 months of shifting cycles
Lookback: How India's capital-goods orderbook swelled and stalled through 18 months of shifting cycles
Between March 2024 and September 2025, the capital-goods orderbook surged past ₹6 lakh crore on a flood of railway and power contracts, only to hit a wall as steel prices softened and project execution slowed. The story wasn't just about the headline number,it was about how the mix shifted from government-led mega orders to private capex, and how the street misread the timing of deliveries.
The Surge: March 2024 to September 2024
The rally began in earnest in the final weeks of March 2024. The Nifty Capital Goods index, which had been consolidating since late 2023, broke out on March 21, 2024, closing at 8,412. Over the next six months, it climbed to 10,238 by September 12, 2024,a gain of 21.7%. The underlying driver was a cascade of order announcements from state-owned enterprises and private players alike.
Indian Railways placed contracts worth ₹1.2 lakh crore for locomotive and wagon procurement between April and August 2024. Power Grid Corporation of India announced ₹45,000 crore in transmission projects. Larsen & Toubro secured its single largest order,₹32,000 crore for a hydrocarbon complex in the Middle East. BHEL received ₹18,500 crore in thermal power equipment orders. The aggregate orderbook for the capital-goods sector, tracked by the Confederation of Indian Industry, crossed ₹5.8 lakh crore by end of September 2024, and touched ₹6.1 lakh crore by mid-October.
The market interpreted this as a structural shift. Brokerages rushed to upgrade earnings estimates. Motilal Oswal raised its target on the sector by 18% in July 2024, citing "unprecedented visibility." HDFC Securities initiated coverage on six capital-goods stocks with a "buy" rating, projecting 25% compound annual growth in order inflows over the next three years. Foreign institutional investors (FIIs) poured ₹12,400 crore into the sector between April and September 2024, according to NSDL data. Domestic institutional investors (DIIs) added another ₹6,800 crore.
The macro environment was supportive. The Reserve Bank of India had held the repo rate at 6.5% since February 2023, but the government's capital expenditure outlay for FY25 was raised to ₹11.1 lakh crore in the July 2024 budget,a 17% increase over the previous year. Steel prices, a key input for capital goods, were stable at ₹55,000 per tonne for hot-rolled coil, providing a predictable cost environment. The global backdrop was also favourable: the US Federal Reserve signalled rate cuts in September 2024, which weakened the dollar and made Indian capital goods more competitive in export markets.
Weekly chart of the Nifty Capital Goods index from March 21, 2024, to September 12, 2025, showing the sharp rally through mid-2024, a consolidation phase, and the subsequent decline from early 2025.
The Peak and the Mix Shift: October 2024 to January 2025
By October 2024, the orderbook had peaked at ₹6.2 lakh crore. But the composition was changing. Government orders,railways, power transmission, defence,still dominated, accounting for 62% of the total. Private sector orders, however, began to pick up. Cement companies placed ₹14,000 crore in equipment orders for capacity expansion. Automobile manufacturers ordered ₹8,500 crore in automation and assembly lines. The renewable energy sector contributed ₹6,200 crore in orders for solar module manufacturing equipment.
The shift was gradual but significant. In the first half of 2024, government orders had constituted 78% of the total. By January 2025, that share had dropped to 55%. Private capex was finally awakening after years of dormancy. But the street failed to appreciate the implications. Government orders typically came with advance payments and faster execution timelines. Private orders were more fragmented, with longer gestation periods and greater sensitivity to input costs.
Steel prices, which had been stable through September 2024, began to soften in November 2024. Hot-rolled coil prices fell from ₹55,000 per tonne to ₹49,500 per tonne by February 2025. The drop was driven by a global glut,Chinese steel exports hit a record 110 million tonnes in 2024, flooding markets in Southeast Asia and the Middle East. For capital-goods companies, lower steel prices meant lower input costs, but it also meant that customers,particularly in the private sector,delayed order finalisations, expecting further price declines.
The earnings season for Q3 FY25 (October-December 2024) revealed the first cracks. Aggregate revenue for the top 10 capital-goods companies grew 14% year-on-year, but order inflows slowed to ₹1.1 lakh crore from ₹1.4 lakh crore in the preceding quarter. The orderbook-to-sales ratio, which had peaked at 4.2x in September 2024, slipped to 3.8x. Execution delays became a recurring theme in management commentary. L&T, in its January 2025 earnings call, noted that "project execution in the domestic market has been slower than anticipated due to land acquisition and regulatory clearances." BHEL reported that 12% of its orders were behind schedule.
Brokerages began to temper their enthusiasm. CLSA downgraded the sector to "neutral" in December 2024, citing "peak orderbook visibility." Jefferies reduced its target multiples for capital-goods stocks by 10% in January 2025, arguing that the market had priced in two years of growth in one year. FII flows turned negative in January 2025, with net outflows of ₹2,100 crore. DIIs remained buyers but at a reduced pace.
The Stall: February 2025 to September 2025
The decline accelerated in February 2025. The Nifty Capital Goods index fell from 9,850 on February 1 to 8,760 by March 15,a drop of 11%. The trigger was the Q4 FY25 earnings season, which ended in May 2025. Aggregate order inflows for the quarter stood at ₹95,000 crore, the lowest in six quarters. The total orderbook, which had been hovering around ₹6 lakh crore, slipped to ₹5.7 lakh crore by March 2025.
Steel prices continued to fall, reaching ₹44,000 per tonne for hot-rolled coil by April 2025,a decline of 20% from the September 2024 peak. While this should have boosted margins for capital-goods manufacturers, the benefit was offset by customers renegotiating contract terms. Many private sector orders were placed with price-escalation clauses tied to steel indices. As steel fell, customers demanded lower final prices, squeezing margins.
The government's capital expenditure trajectory also faltered. The FY26 budget, presented in February 2025, allocated ₹12.5 lakh crore for capex,a 12.6% increase over FY25's revised estimate. But the revised estimate itself was ₹10.8 lakh crore, lower than the budgeted ₹11.1 lakh crore, indicating that the government had undershot its own target. The street interpreted this as a signal that fiscal consolidation was taking precedence over infrastructure spending.
Execution remained the Achilles' heel. In April 2025, the Ministry of Railways admitted that only 68% of its capital expenditure target for FY25 had been achieved, blaming "contractor delays and material shortages." Power Grid Corporation reported that 22% of its ongoing transmission projects were delayed by an average of four months. The cumulative effect was that the orderbook, while still large, was not converting into revenue at the expected pace.
By June 2025, the Nifty Capital Goods index had fallen to 8,200,a 20% decline from the September 2024 peak. The sector was now trading at 38x trailing earnings, down from 52x at the peak. Brokerages were in full retreat. Morgan Stanley downgraded the sector to "underweight" in May 2025, citing "a combination of slowing order inflows, execution risks, and a deteriorating macro backdrop." Kotak Institutional Equities cut its earnings estimates for the sector by 12% for FY26 and 15% for FY27.
The final blow came in August 2025. The Reserve Bank of India, in its August 6 policy review, cut the repo rate by 25 basis points to 6.25%,the first cut in over two years. The market initially cheered the move, but the accompanying commentary was cautious. The RBI governor noted that "the global environment remains uncertain, and domestic growth is showing signs of moderation." The capital-goods sector, which had been pricing in a rate-cut-led revival, saw the rally fizzle within two weeks.
By September 12, 2025, the focus date of this lookback, the Nifty Capital Goods index closed at 8,240. The orderbook stood at ₹5.4 lakh crore,down 13% from the peak. The story was no longer about the headline number. It was about the mix shift that the market had misread, the execution delays that had compounded, and the cyclical forces that had turned from tailwind to headwind.
Daily chart of the Nifty Capital Goods index from March 21, 2024, to September 12, 2025, with 50-day, 100-day, and 200-day moving averages. The index broke below all three MAs in early 2025 and failed to reclaim them through the end of the period.
Leadership Rotation Within the Sector
The 18-month cycle saw a clear rotation in leadership. In the first phase (March to September 2024), the winners were companies with heavy exposure to government orders. BHEL surged 62%, Power Grid gained 48%, and L&T rose 35%. These stocks benefited from the perception of "safe" orderbooks with sovereign backing.
In the second phase (October 2024 to January 2025), the leadership shifted to companies with private-sector exposure. Thermax, which supplies boilers and heat exchangers to the cement and steel industries, rose 28%. ABB India, which provides automation solutions for factories, gained 22%. Siemens India, with its strong presence in the renewable energy and data centre segments, advanced 18%. The market was pricing in the private capex revival.
In the third phase (February to September 2025), the leadership rotated again,this time to defensive names. Cummins India, which supplies engines and power generation equipment, fell only 8% during the downturn. Havells India, with its diversified electrical products portfolio, declined 12%. In contrast, BHEL lost 38% from its peak, and L&T shed 22%. The market was punishing companies with the highest orderbook-to-sales ratios, as execution delays became more pronounced.
The top-5 stocks by weight in the sector at the start of the period were L&T (22%), Reliance Industries (18%,though often classified under energy, its capital-goods subsidiary contributed), BHEL (15%), Power Grid (12%), and Siemens India (10%). By September 2025, the rankings had changed: L&T remained top but its weight had fallen to 19%, Siemens India had risen to 14%, and BHEL had dropped to 11%.
Cross-Sector Comparison
Over the same 18-month period, the capital-goods sector underperformed several other sectors. The Nifty IT index rose 14% between March 2024 and September 2025, driven by cost-cutting demand from US clients and a weak rupee. The Nifty Pharma index gained 18%, benefiting from US FDA approvals and a strong export pipeline. The Nifty FMCG index was flat, but its low volatility made it a relative safe haven during the downturn.
The sectors that performed worse than capital goods were banking (Nifty Bank fell 6%) and real estate (Nifty Realty fell 12%). Banking was weighed down by margin compression and rising non-performing assets in the microfinance segment. Real estate suffered from a slowdown in luxury housing demand and regulatory uncertainty.
The key takeaway was that capital goods, which had been a market darling in the first half of the period, became a laggard in the second half. The sector's beta to the broader market shifted from 1.3 in the rally to 1.5 in the decline, indicating that it was more volatile on the downside,a classic pattern for cyclical sectors.
Historical Analog: The 2015,2016 Cycle
The 18-month cycle from March 2024 to September 2025 bore a striking resemblance to the capital-goods cycle of 2015,2016. In that earlier period, the orderbook had swelled to ₹4.5 lakh crore by mid-2015, driven by railway and power contracts under the newly elected government. The Nifty Capital Goods index had risen 40% from January 2015 to August 2015.
Then came the stall. Steel prices collapsed in late 2015, falling 30% in six months. The government's capex push slowed as fiscal deficit targets loomed. Execution delays mounted. The orderbook shrank to ₹3.8 lakh crore by March 2016. The index fell 25% from its peak and did not recover until late 2017.
The parallels were uncanny. In both cycles, the initial surge was driven by government orders, the peak was followed by a steel price decline, and the recovery depended on a revival in private capex. In 2016,2017, private capex took 18 months to materialise, driven by the recovery in global commodity prices and the implementation of the Goods and Services Tax. In the current cycle, private capex had begun to show signs of life in late 2024, but the steel price decline and execution delays had pushed the timeline further out.
The historical analog suggested that the sector could remain under pressure for another 12 to 18 months before a meaningful recovery. The orderbook, while still large, needed to convert into revenue, and that required a stable input cost environment and faster project execution.
The Verdict: Where the Cycle Stood at End of Period
By September 12, 2025, the capital-goods orderbook was at ₹5.4 lakh crore,still elevated by historical standards, but contracting. The mix had shifted from government-led to private-led, but the private orders were slower to execute. Steel prices were at multi-year lows, which was a double-edged sword: lower costs but also lower pricing power. The RBI had cut rates, but the impact would take quarters to feed through.
The sector was trading at 38x trailing earnings, which was not cheap but was down from the peak. Brokerage consensus had turned cautious, with more downgrades than upgrades in the preceding six months. FIIs had been net sellers since January 2025, while DIIs had provided a floor.
The key question was whether the orderbook would stabilise or continue to decline. The answer depended on two factors: the pace of government capex in the second half of FY26, and the timing of a private capex revival. The government had signalled that it would front-load capex in the first half of FY26, but the August 2025 data showed that only 35% of the budgeted amount had been spent. Private capex, meanwhile, was contingent on capacity utilisation rates, which were at 72%,below the 75% threshold that typically triggers investment.
The verdict, therefore, was neutral with a bearish tilt. The orderbook was still large, but the momentum was negative. The sector had not yet reached a trough, and the historical analog suggested that the bottom could be 12 to 18 months away. The street had misread the timing of deliveries, and the market was now repricing that error.
Verdict
Stance: BEARISH
Horizon: 12,18 months
The capital-goods orderbook cycle had peaked in late 2024 and was in a corrective phase. The shift from government to private orders, while positive in the long run, had introduced execution risks that the market had underestimated. Steel price softness, while beneficial for input costs, had created a "wait-and-watch" mentality among customers. The RBI rate cut was a positive, but its impact on capex would take time. The sector needed a catalyst,either a sharp pickup in government spending or a sustained rise in capacity utilisation,to reverse the trend. Until then, the orderbook would likely continue to shrink, and the sector's valuation would remain under pressure.
30-minute intraday chart of the Nifty Capital Goods index on September 12, 2025, showing a low-volume, range-bound session with a close near the day's low, reflecting the lack of conviction among traders as the sector awaited fresh direction.
This lookback was compiled from sector index data, earnings transcripts, brokerage reports, NSDL flow data, and government expenditure releases. The views expressed are based on retrospective analysis and do not constitute investment advice.