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Stocks of most capital goods companies are seen trading wit negative bias next week due to weak Oct-Dec earnings and high valuation of stocks. However, investor is seen preferring stocks of mid-cap and small-cap capital goods companies such as Cummins India, Sadbhav Engineering, Voltas and V-Guard Industries. Mid-cap and small-cap companies offer good valuation and are likely to do better, once investment cycle picks up.
On the earnings front, out of the seven capital goods and engineering, which released Oct-Dec earnings in the last week of January, only Cummins India reported earnings above street estimates. We expect the stock to react positively on the back of these results in the near term. However, we expect Bharat Heavy Electrical recovering as valuation has become attractive for long-term investors.
