Capital Goods Stocks Outlook for the week – 23 to 27.06.2014
(www.rupeedesk.in)
(www.rupeedesk.in)
Stocks of capital goods companies are seen rangebound with a
positive bias next week.
However, the sector could be impacted if overall market
sentiment takes a hit on account
of the conflict in Iraq. Another factor influencing the
market will be the rise in freight
cost.
Citing concerns over the Indian Railway's financial
situation, the government yesterday
increased passenger rail fares by 14.2% and freight rates by
6.4%, effective Jun 25.
While this may negatively impact shares of cement, mining,
metal, oil and gas, fertiliser,
and logistics companies the move may translate into long
term gains for capital goods
companies that have exposure to railway business such as KEC
International, and Larsen
& Toubro.
Although the hike in fares and freight rates will impact
inflation, the move is a positive
because it will help improve the financial situation of
Indian Railways. With the help of
policy support, timely bureaucratic decision making and
improving investor confidence,
the domestic capex cycle (which may have bottomed out in
2013) should strengthen in
the future.