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Stocks of construction and engineering heavyweight Larsen and Toubro are likely to be affected on account of the sanction imposed on the company by the World Bank. Larsen & Toubro has been barred from participating in projects funded by the World Bank for six months, for violation of fraud and corruption policy. Overall stocks of most of capital goods and engineering companies are seen trading in a thin bad with a negative bias. However, investors are seen cherry-picking stocks of a few large-cap capital goods companies on account of strong fundamentals and attractive valuations. Stocks of Bharat Heavy Electricals are seen in focus next week as investors find current valuations favourable. Also, stocks of product companies such as Cummins and Thermax are expected to do better in the short term.
The Union Budget for 2013-14 (Apr-Mar) proposed 15% deduction to companies purchasing plant and machinery worth more than 1 bln rupees over the next two financial years. This is seen driving moderate demand for machines and equipment makers. However, beleaguered wind energy equipment maker Suzlon Energy, whose stocks closed around 18% higher on Mar 1 on account of the some positive measure proposed in the Budget, is seen trading down. In the Budget, the government committed to provide low cost finance for renewable energy projects and also reintroduced 'generation-based incentives' for wind energy projects. Suzlon is sitting on a huge pile of debt and unless that issue is sorted investors are likely to stay away. Capital goods and engineering companies, which cater to the power sector, are unlikely to see any significant upturn unless some progress is achieved on land acquisition reforms.
