Capital Goods Stocks Outlook for the week – 24 to 28.08.2015
Seen
extending losses next week
( www.rupeedesk.in )
Stocks
of most capital goods companies are seen continuing their downward slide next
week as
negative
sentiment from a spill over of a disappointing end of monsoon session and weak
macro
environment
continue to weigh. However, long-term investors may see the coming week as a
good opportunity to build position in capital goods majors as most analysts
believe the pickup in
investment
cycle is just around the corner.
We
expect above-average valuation (of capital goods companies) to sustain for the
next few years for the sector, given we are at the cusp of start of multiyear
capex cycle. Government investments in some sectors such as transmission and
distribution infrastructure and roads have already picked but private sector
capital expenditure is yet to pick up.
Capital
goods company Thermax is seeing pickup in enquiry levels from sectors such as
pharmaceutical and food processing that requires relatively smaller investments,
while enquiry levels from large core sectors like steel, oil and gas remain muted.
However, product cycle companies such as Siemens and Cummins India are expected
to outperform their peers as low-ticket order sizes are already being awarded.
Stocks of capital goods companies may react on stock-specific news next week as
no major development on the macroeconomic level or industry level is in the
pipeline.
