Capital Goods Stocks Outlook for the week – 15 to 19.02.2016
(Weak
December industry output data to weigh)
( www.rupeedesk.in )
Shares
of capital goods are seen weak amid concern over industrial
growth
after the Central Statistics Office said the country's industrial
production
contracted for the second straight month in December.
The
data, release after market hours yesterday, showed that factory output
in
December contracted 1.3% on year compared with 3.4% a month ago
and
3.6% growth in December last year. Capital goods output, an
indicator
of investment demand, contracted 19.7% on year in December
compared
with 24.5% contraction a month ago.
Shares
of capital goods makers are expected to be under pressure in line
with
the sentiment in the broad market, which is fretting over rising bad
loans
in the banking sector.
Rising
bad loan impinge on banks' ability to lend and limit the ability to
cut
interest rates, which is seen fostering demand.
State-owned
Bharat Heavy Electricals is also seen under pressure and
may
fall to 90 rupees per shares, the technical. On Thursday, the power
equipment
major reported a loss for the second straight quarter and
further
raised red flags on orders worth 3.26 bln rupees terming them
slow
moving.
We
reduce our estimates factoring in margin pressure due to order-related
execution,
pay commission provisioning and realisation pressure margin
pressure
could sustain; hence, we have cut earnings by 74% for FY17E
and 49% for FY18E.