Capital Goods Stocks Outlook for the week – 28.12.2015 to
01.01.2016
Seen
tracking wider market; economic data eyed
( www.rupeedesk.in )
Stocks
of most capital goods companies are seen tracking broader markets next week
in
the absence of stock specific actions, and are likely to remain in a range due
to
weak
trading volumes. However, towards the end of the week, release of macroeconomic
data
such as core sector growth for November is likely to impact the shares
in
the sector.
While
in the near term, shares of sector bellwether Larsen & Toubro are seen
trading
with
a weak bias, long term investors see the current slump in the share price as a
good
opportunity to build their positions. L&T's share price has corrected by
12% in
the
last three months against a decline of 1.4% for the Sensex. This factor in the
shortterm
weak
outlook for orders as well as a slow execution cycle. We sees L&T
benefiting
from the domestic opportunities in infrastructure, heavy engineering and
electrical
and automation.
We
believe L&T is currently in a sweet spot of the order win cycle, with
competitive
intensity
across several segments at low levels, Reversal in the execution cycle and
working
capital from current highs should also help drive a strong recovery in cash
flows.
Stocks of L&T and state-owned Bharat Heavy Electricals are seen moving
sideways
to negative next week.
