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Stocks of most capital goods and engineering companies are seen trading down next week as investors may refrain from investing in the sector due to poor industrial production and slow order book growth. The industrial output data pegged the growth of the industry at 1% in April, higher than last year, but lower sequentially. This will keep the investors away, as there is no sign of any recovery. The industrial output for capital goods was at 6.2% in March.
Investors see slight corrections in stocks of bigger companies, including sector bellwether Larsen & Toubro as its order book is seen weaker sequentially. The company is currently focusing on international markets to mitigate the shrinking domestic order book growth. The domestic capital goods players are facing competition also from China and Korea. The rupee depreciation may bring back some orders but it will not be significant. Stocks of companies like Siemens which have high exposure to imports and Suzlon, which has overseas debt, may also take a slight hit due to rupee depreciation. Companies such as Cummins India Ltd and Crompton Greaves Ltd which are net exporters are set to benefit from a weak rupee. Stocks of Voltas and Bharat Heavy Electricals Ltd are also expected to do well comparatively because of negligible exposure to currency fluctuations.
