GOLDEN RULES FOR TRADING

Capital Goods Stocks Outlook for the week – 11 to 15.01.2016 (In narrow range with weak bias)

Capital Goods Stocks Outlook for the week – 11 to 15.01.2016
(In narrow range with weak bias)



Shares of capital goods companies are seen trading sideways with a
negative bias next week tracking the broader market. Next week will also
see the release of key economic indicators such as the industrial
production data for November and consumer price inflation for December
on Tuesday. These data will be the key trigger for the stocks next week,
coupled with company-specific development.

Investors are likely to take short position on these stocks, selling shares
on every rise, in the run-up of what is expected to be another weak
earnings season for the sector.

Most companies are not only likely to report weak topline and
bottomline, but also weak order inflows. Order flow in the boiler-turbinegenerator
equipment makers has been extremely low in the first six
months of the financial year ended September and the trend is seen
continuing in Oct-Dec as well.

There have been no major power plant projects announced in Apr-Dec
and even the tenders for much-talked about ultra mega power projects
have failed to take off so far.

With the consumption in the economy yet to show sign of significant pick
up, revival is private sector capital expenditure is unlikely to pick up
anytime soon. Shares of sector bellwether Larsen & Toubro that fell 8.5%
in the last five trading sessions are seen accumulating further next week.

Stocks of state-owned Bharat Heavy Electricals too are seen falling
further, but settling in at 144-146 rupees. Even if the shares of the
company rise, they are unlikely to go beyond 164 rupees in the near-term.