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India's capital expenditure (capex) cycle is gaining strong momentum driven largely by old-economy sectors, positioning the country as a hedge against the global AI-led investment euphoria expected to peak in Calendar Year 2026 (CY26), according to a report by ICICI Securities.
The report noted that, unlike the US, where a sharp rise in spending on IT equipment and software is now dominating private investment, India's capex story continues to be broad-based and rooted in traditional sectors. It added that this trend not only differentiates India from global patterns but also strengthens the country's long-term investment outlook. It stated, "India capex upcycle is an AI hedge. Unlike US, where capex growth is AI-led now, old-economy sectors are fuelling India's capex growth; thereby, positioning India as a hedge against the AI euphoria in CY26". The report also highlighted that utilities, energy (excluding Reliance), metals, and industrials remain the biggest contributors to listed companies' capex. Utilities alone recorded capex of around Rs 1.98 trillion, followed by the energy sector at Rs 1.4 trillion and metals at Rs 1.1 trillion. Other segments such as healthcare, telecom, materials, and cement are also adding meaningfully to the investment cycle. The report added that this wide participation from old-economy industries highlights India's focus on building domestic capacity across critical areas such as energy transition, defence, rare earth processing, infrastructure, manufacturing, and digital public infrastructure. In contrast, the US investment cycle is currently being driven by a surge in AI-related capex. Private capex in IT equipment and software has risen sharply, raising concerns among economists about possible misallocation of capital. The share of IT-related investments within America's gross private domestic investment has touched multi-year highs, signalling an AI boom that may expose the economy to sectoral concentration risks. India, however, remains shielded from such risks as its investment upcycle is not reliant on AI-driven spending. The broader sectoral spread ensures a more stable and sustainable capex path, making the country an attractive hedge for global investors seeking diversification from the AI frenzy. The report also outlined that the ongoing capex uptrend will provide further fillip to India's investment rate in the coming years, supporting growth as companies expand capacity and the government boosts infrastructure creation. (ANI)
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