Capital Goods
Stocks Outlook for the Week – 22 to 26.09.2014
( www.rupeedesk.in )
Stocks of most capital goods
companies are seen trading in a range on lack of sectorspecific
triggers.
However, investors are seen
favoring stock of capital goods companies operating in
short-business-cycle businesses
such as Cummins India, Voltas and Crompton Greaves
over peers such as those catering
to the boiler, turbine and generator demands of the
power industry.
Based on projects sanctions by
financial institutions and money raised by External
commercial borrowings/initial
public offers, RBI estimates corporate capex dipped by
18% in FY14 to Rs 2,514bn (2.51
trln rupees), report by the Reserve Bank of India.
According to the report, based on
projects sanctioned till 2013-14 (Apr-Mar), the
corporate capex is likely to see
another dip in 2014-15 (Apr-Mar).
With a major corporate capital
expenditure revival still a long way away, long-businesscycle
companies like Thermax, Siemens
and Bharat Heavy Electricals are not
recommended with a short-term
view.
Stocks of sector bellwether
Larsen & Toubro, which fell 4.4% this week, may see further
buying pressure if the stock of
the company fall below the 1,500-rupee level.
Among the short-business-cycle,
or product, companies, we are bullish on Cummins
India. We see a potential upside
of 15-20% to the stock price in the next four to six
months. Given the improved
guidance, increasing visibility of the domestic environment
and significant ramp-up in the
export business, we believe the company is poised to
deliver a healthy earnings growth
in the coming years.