Capital Goods Stocks Outlook for the week – 23 to 27.11.2015
Seen
range bound; L&T likely to gain
Stocks
of capital goods companies are seen trading in range next week in the absence
of
any
sector-specific positive development and existing bleak demand outlook for the
domestic
market. Project-driven companies, especially those relying on demand from
core
business such as power and steel like Thermax and Bharat Heavy Electricals, are
likely
to remain subdued while investors may prefer product-driven companies. Sector
bellwether
Larsen & Toubro likely to extend its marginal growth trajectory as
long-term
investors
are seen resorting to value buying, given the recent correction in the stock
post
a
disappointing Jul-Sep earnings.
Cummins
India and L&T. Being on the cusp of change, with sustainable competitive
advantage
and companies who can deliver sustained earnings growth over the next few
years.
While the scenario is likely to remain weak for the sector with little order
visibility
in
the near-term, we expect the situation for these companies to improve January
onwards.
Reports have also indicated that the government may invite fresh bids for the
360-bln-rupee
Tilaiya ultra mega power project, which may help revive investor
sentiment towards domestic power equipment producers.