GOLDEN RULES FOR TRADING

Capital Goods Stocks Outlook for the week – 23 to 27.06.2014

Capital Goods Stocks Outlook for the week – 23 to 27.06.2014
(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.