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Stocks of capital goods companies are expected to be rangebound next week as poor industrial production data for October may dampen optimism regarding improvement in investment cycle due to change in government. Capital goods sector industrial output rose 2.3%, compared with 7% a year ago. However, overall industrial output declined 1.8% in October against a 2% growth last year. There is optimism still, that capex cycle will recover post-elections. However, it is a long-term positive. Currently, the industrial output is low, which will affect the companies. Although the stocks will not tank, but the rally position will tone down; there is no significant positive currently. Investors are, however, expecting slight improvement in order inflow and operating margins in the coming few months. Analysts said that if growth sustains and order inflow trend broadens for the next few quarters, policy decisions after the elections would give a positive fillip to the industry. Market is positive about business turnaround in the medium term on high utilization in key sectors, some uptick in investor sentiment, but this is not corroborated by on-ground project execution. Investors will prefer companies that operate in West Asia, as orders with high margins are expected to flow from the region in near term. Increased order flows from the region are likely to help companies such as Voltas Ltd and Larsen & Toubro. Investors are also positive on Crompton Greaves due to its exposure to overseas orders. Competition from Chinese and Korean players may offset some of the gains
Stocks of capital goods companies are expected to be rangebound next week as poor industrial production data for October may dampen optimism regarding improvement in investment cycle due to change in government. Capital goods sector industrial output rose 2.3%, compared with 7% a year ago. However, overall industrial output declined 1.8% in October against a 2% growth last year. There is optimism still, that capex cycle will recover post-elections. However, it is a long-term positive. Currently, the industrial output is low, which will affect the companies. Although the stocks will not tank, but the rally position will tone down; there is no significant positive currently. Investors are, however, expecting slight improvement in order inflow and operating margins in the coming few months. Analysts said that if growth sustains and order inflow trend broadens for the next few quarters, policy decisions after the elections would give a positive fillip to the industry. Market is positive about business turnaround in the medium term on high utilization in key sectors, some uptick in investor sentiment, but this is not corroborated by on-ground project execution. Investors will prefer companies that operate in West Asia, as orders with high margins are expected to flow from the region in near term. Increased order flows from the region are likely to help companies such as Voltas Ltd and Larsen & Toubro. Investors are also positive on Crompton Greaves due to its exposure to overseas orders. Competition from Chinese and Korean players may offset some of the gains
