Capital Goods Stocks Outlook for the
week – 13 to 17.06.2016
(Down on weak IIP data; L&T may
gain)
( www.rupeedesk.in )
Shares of
capital goods companies, except Larsen & Toubro Ltd, are largely expected
to trade with a
weak bias next week owing to negative sentiment on account of disappointing
industrial output data. After market hours yesterday, the Central Statistics Office
announced that the industrial output for April contracted 0.8% as against a growth of
3.0% a year ago, primarily on account of a sharp decline in the manufacturing and capital
goods segments.
Output in
the manufacturing sector, which accounts for three-fourths of the Index of Industrial
Production, contracted 3.1% in April, compared with growth of 3.9% a year ago. Output
in the capital goods segment, an indicator of investment and demand in the economy,
contracted a whopping 24.9% in April, against growth of 5.5% a year ago.
Industrial
capex activity could be a few quarters away, as capacity utilization for most companies a
function of demand improvement remains weak. Bharat Heavy Electricals Ltd is seen
extending losses next week and the stock may hit a low of 115 rupees. The downward
trend in shares of the state owned company is likely to continue and critical support for
the stock is seen at 102 rupees.
Shares of
Larsen & Toubro are expected to remain strong as the company has strong
order
inflows and project execution in the construction segment which will likely
offset headwinds from
exposure to the capital goods sector.
