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Stocks of most capital goods and engineering stocks, except Larsen & Toubro, are seen trading with a negative bias this week on account of weak Jan-Mar earnings. Stocks of sector bellwether Larsen & Toubro could see marginal gains, as investors remain positive on the company meeting its order inflow guidance for 2012-13 (Apr-Mar). On the other hand, investors have a negative view on generator sets and engine maker Cummins India. On Friday, after market close, the company posted 30.4% rise in Jan-Mar net profit at 1.88 bln rupees. However, the growth was largely aided by 241.5% jump in other income to 823.7 mln rupees. The company's adjusted net profit for Jan-Mar fell 11.66% on year to 1.06 bln rupees and its margin shrunk to 16.79% from 18.71% on year. We remain largely negative on capital goods stocks owing to the 50-60% over supply in the industry and falling order book. Diversified capital goods companies will do better. L&T and Cummins India, companies with deep pockets, will successfully swim against the negative tide, but the general sentiment on the industry will be negative. Electrical equipment maker Crompton Greaves is likely to trade with a negative bias in the near term, as the company has not seen significant improvement in its order book. Investors are eagerly looking forward to some clarity on the additional restructuring costs at the company's plant in Belgium.
