Capital Goods Stocks Outlook
Budget, major earnings to provide cues
This story was originally published at 22:21 IST on 19 July 2024
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MUMBAI – The upcoming Budget on Tuesday and quarterly earnings of major companies are likely to drive sentiment for shares of capital goods companies next week. Larsen & Toubro, CG Power and Industrial Solutions, and Suzlon Energy are some of the companies set to come out with the June quarter results next week.
The Budget will be a major event for the sector, with analysts expecting the government to continue with its capital expenditure push. Shares of several companies have risen in the past few months on expectations of more orders from the government post Budget, pushing stock prices of some companies to uncomfortable valuations, analysts said. At current valuations, it is imperative that Budget is as per expectations, analysts said.
This week, profit booking was seen across the sector ahead of the Budget. The BSE Capital Goods index fell 4.5% this week, with shares of Hindustan Aeronautics and Bharat Dynamics down 12% each. Among others, shares of Siemens and Bharat Heavy Electricals were down 10% each this week.
Industry major L&T's earnings will be closely watched by market participants for cues on demand environment for the sector and its margins, which were a pain point last quarter. L&T will likely report a consolidated net profit of 28.14 bln rupees, down 36% from the previous quarter but up 12.9% on year, according to an average of estimates by six brokerage houses. The engineering behemoth's consolidated revenue is seen at 515.47 bln rupees, down 23.2% on quarter and up 7.6% on year.
Dependency on contracts from the Centre, state governments, and government-owned companies will likely rein in L&T's revenue for the quarter. It likely faced weakness in execution in its core engineering, procurement, and construction business in May due to general elections in the country and in June due to hot weather, Kotak Securities' Institutional Equities Research said in its Apr-Jun preview note.
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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:
| Company | Price | Week-on-week change in % | Resistance | Support |
| Bharat Heavy Electricals | 294.10 | (-)9.80 | 313.10 | 283.20 |
| CG Power and Industrial Solutions | 675.65 | (-)7.00 | 711.00 | 633.70 |
| Larsen & Toubro | 3618.50 | (-)0.90 | 3678.10 | 3580.20 |
| Siemens | 6850.20 | (-)10.00 | 7266.70 | 6616.70 |
| Thermax | 4972.35 | (-)5.30 | 5124.10 | 4764.10 |
| S&P BSE Capital Goods | 71599.17 | (-)4.50 | 73635.80 | 70467.10 |
| Nifty 50 | 24530.90 | 0.10 | 24977.90 | 24284.60 |
| S&P BSE Sensex | 80604.65 | 0.10 | 81985.80 | 79808.50 |
End
Reported by Anshul Choudhary
Edited by Ashish Shirke
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