Capital Goods Stocks Outlook For The Week – 04 To 08.12.2017

Capital Goods Stocks Outlook For The Week – 04 To 08.12.2017

             Equity Cash/Futures/Options Segment 

Stocks of capital goods companies are likely to fall next week in line with grim outlook for the broader market. Next week, we will keep a watch on the Reserve Bank of India's fifth bi-monthly monetary policy meet scheduled for Wednesday. The central bank's decision is expected to be a trigger for private capital expenditure. Industry bellwethers Siemens Ltd and Larsen & Tubro Ltd expect private capital expenditure in the segment to be 12-18 months away, they said in post Jul-Sep earnings conference calls. The lack of private capex in the industry (Capital Goods Industry) is an increasing concern as it creates a shortage of orders. However, the pick-up in growth of the industrial sector, as represented in the GDP data released on Thursday, can help drive market sentiment towards a positive trigger for the sector. Most stocks in the capital goods sector are expected to trade on a sideways to downwards trend for the short to medium term. The industry is eagerly waiting for the government to come out with large orders to contribute towards growth of the capital goods
production sector for the upcoming months. The implementation of the government's rural electrification scheme Deen Dayal Upadhyaya Gram Jyoti Most seen subdued on rise in input cost
Yojana and household electrification scheme Saubhagya will create opportunity for a large number of orders in the capital goods segment. A trigger for stocks of the industry giant, L&T can be the order inflow for the month of November, which the company is expected to be announce next week. Sector heavyweight Siemens said the company was looking to win a large-value project to improve its revenue and profit margins. Stock of state-owned Bharat Heavy Electricals Ltd is likely to stay below the 93-rupee mark in the short to medium term. Most thermal power companies, including Pune-based Thermax Ltd, and CG Power & Industrial Solutions Ltd are expected to trade in line with broader market indices over the short to medium term. Shares of Thermax are expected to find support at the 1,020-rupee level, as the company copes with the ceasing of operations of its joint venture Thermax Babcock & Wilcox. Most power-dependant capital good companies are likely to face tough competition when the government rolls out renewable energy and power transmission projects.

Source : Cogencis Information Services Ltd.

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