Stocks of capital goods companies are seen trading with a positive bias next week, as the Index of Industrial Production data for July released Thursday showed signs of revival in the sector. The capital goods segment saw a sharp 15.6% growth in July. Investors are likely to favour stocks of diversified players such as Larsen & Toubro. L&T is one of the best positioned companies in the sector to capitalize on a revival in the capex cycle. With several infrastructure projects being cleared, L&T is set to benefit the most. Investors are also betting on Crompton Greaves as its operations in Belgium have turned profitable and the company is focussing on high margin orders, which is likely to boost its profitability in the near future. The company, which is a net exporter, is also expected to benefit from the rupee's depreciation against the dollar. A fall in rupee benefits domestic electrical equipment manufacturers as it makes imports more expensive and exports competitive. Thermax and Cummins India are also expected to trade higher due to increased focus on exports and cash flow generation. However, investors feel that a meaningful recovery in investment cycle is unlikely in the short-term as results of government measures to boost investment cycle is still 12-15 months away. The sector stocks have seen some movement after a long time. Things are looking up a bit for the sector, but it remains to be seen how sustainable it will be since the domestic economy has still not recovered. Investments are still sluggish. The fundamentals of the sector are still in doldrums and the power sector continues to suffer losses and regulatory bottlenecks. However, with the government clearing infrastructure projects, there are expectations that the sector will turn positive soon. Overall, dealers and investors have a positive outlook on capital goods stocks for next week on signs of revival.
Capital Goods Stocks Outlook for the week - 16.09.2013 - 20.09.2013
Stocks of capital goods companies are seen trading with a positive bias next week, as the Index of Industrial Production data for July released Thursday showed signs of revival in the sector. The capital goods segment saw a sharp 15.6% growth in July. Investors are likely to favour stocks of diversified players such as Larsen & Toubro. L&T is one of the best positioned companies in the sector to capitalize on a revival in the capex cycle. With several infrastructure projects being cleared, L&T is set to benefit the most. Investors are also betting on Crompton Greaves as its operations in Belgium have turned profitable and the company is focussing on high margin orders, which is likely to boost its profitability in the near future. The company, which is a net exporter, is also expected to benefit from the rupee's depreciation against the dollar. A fall in rupee benefits domestic electrical equipment manufacturers as it makes imports more expensive and exports competitive. Thermax and Cummins India are also expected to trade higher due to increased focus on exports and cash flow generation. However, investors feel that a meaningful recovery in investment cycle is unlikely in the short-term as results of government measures to boost investment cycle is still 12-15 months away. The sector stocks have seen some movement after a long time. Things are looking up a bit for the sector, but it remains to be seen how sustainable it will be since the domestic economy has still not recovered. Investments are still sluggish. The fundamentals of the sector are still in doldrums and the power sector continues to suffer losses and regulatory bottlenecks. However, with the government clearing infrastructure projects, there are expectations that the sector will turn positive soon. Overall, dealers and investors have a positive outlook on capital goods stocks for next week on signs of revival.
