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Stocks of capital goods and engineering companies are seen taking cues from their Oct- Dec earnings next week, and from the Reserve Bank of India's policy review on Tuesday. Investors are seen bullish on Larsen & Toubro, which reported better-than-estimated Oct- Dec earnings Thursday. However, the company's operating margins declined in the quarter, which is expected also in the case of other companies in the sector.
Among the capital goods companies that will report their quarterly earnings next week are Crompton Greaves, KEC International, Siemens, Cummins India, and Alstom Projects India. According to the average of the estimates, Crompton Greaves' revenue is seen rising 7% from a year ago to 32.24 bln rupees but net profit is likely to decline 16% to 648 mln rupees. The industrial and electrical products maker will release its Oct-Dec earnings Tuesday. "Crompton (Greaves) is a function of what happens in the international markets.
Investors may also favour companies that have wide exposure to the transmission and distribution segment. T&D companies, with significant international exposure, like KEC International and Kalpataru Power bagged orders from both Power Grid Corp of India and international market. Power systems provider KEC International will release its earnings Wednesday. The company is expected to report strong growth of 15% in its topline and maintain its strong order inflow momentum.
As for the impact of the RBI's policy review on stocks of companies in the sector, we expect any rate cut would be a positive for the sector as it is capital-intensive. If the RBI undertakes an interest rate cut, some large projects could see the light of the day, which will benefit the sector. Any rate cut would also boost companies' capital expenditure, which would translate into orders for new plants, construction and equipment.
