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Stocks of capital goods companies are seen rangebound with a negative bias next week, on account of weak India industrial production data for February. India's industrial output contracted -1.9% in February, and was the lowest in nine months, as capital goods and consumer goods continued to decline, data released by the Central Statistics Office Friday after market hours showed. The indicator of investment demand--capital goods segment--declined sharply by 17.4% in February, the lowest in the last 20 months. With this, the capital goods segment has declined for the third straight month.
However, we are positive that Jan-Mar earnings might bring good news to the sector. 4Q (Jan-Mar) for India's Industrial sector (ex-BHEL) will be a better quarter, as earnings will be underpinned by recovery in margins. The improvement in margins will be driven by benefits from restructuring/ cost cutting initiatives and lower negative operating leverage, as we expect revenue decline will slow down further in 4Q (Jan-Mar). Energy equipment maker Siemens will be the first to declare its earnings for Jan-Mar. Next week, we expect trading volume to be subdued owing to a three-day trading week. Exchanges will be closed Monday on account of Ambedkar Jayanti and on Friday owing to Good Friday.
Stocks of capital goods companies are seen rangebound with a negative bias next week, on account of weak India industrial production data for February. India's industrial output contracted -1.9% in February, and was the lowest in nine months, as capital goods and consumer goods continued to decline, data released by the Central Statistics Office Friday after market hours showed. The indicator of investment demand--capital goods segment--declined sharply by 17.4% in February, the lowest in the last 20 months. With this, the capital goods segment has declined for the third straight month.
However, we are positive that Jan-Mar earnings might bring good news to the sector. 4Q (Jan-Mar) for India's Industrial sector (ex-BHEL) will be a better quarter, as earnings will be underpinned by recovery in margins. The improvement in margins will be driven by benefits from restructuring/ cost cutting initiatives and lower negative operating leverage, as we expect revenue decline will slow down further in 4Q (Jan-Mar). Energy equipment maker Siemens will be the first to declare its earnings for Jan-Mar. Next week, we expect trading volume to be subdued owing to a three-day trading week. Exchanges will be closed Monday on account of Ambedkar Jayanti and on Friday owing to Good Friday.
