Capital Goods Stocks Outlook for the week – 05 to 09.Oct..2015
(Weak
on low demand, inventory build-up)
Shares
of most capital goods companies are seen trading in the negative zone next week
due
to a muted demand environment and inventory build-up.
Post
rate cut attractive bullish up-move is witnessed so far, but the momentum is
missing. The Reserve Bank of India cut its repo rate by 50 basis point on
Tuesday and since then most banks have slashed their lending rates. After the
rate cut, shares of capital goods stocks gained initially but corrected soon
after as market participants don't expect a pickup in demand for power,
industrial and construction equipment anytime soon.
We
believe that the stocks will open lower on Monday and will continue declining thereafter
through the week. According to the data released by the commerce and industry
ministry on Wednesday, the growth in key core industries rose to 2.6% in August
from 1.1% a month ago lead by cement, electricity and fertilisers companies.
Gross
domestic product growth has also softened in the first half of this year.
Growth slowed to 7.0% in Apr-Jun from 7.5% in Jan-Mar. However, there is no
recovery in demand from cements, fertilisers and chemical sector companies.
