Capital Goods Stocks Outlook
To extend losses next wk on West Asia tensions
This story was originally published at 23:02 IST on 4 October 2024
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MUMBAI – Shares of capital goods companies are expected to extend losses next week amid rising uncertainty over the geopolitical developments in West Asia. However, these losses could be capped for select companies on expectations of healthy growth in corporate earnings for the September quarter.
Investors are eyeing the ongoing conflict between Israel and Iran as it could adversely affect the operations of companies that derive a portion of their revenue from this region. Clashes between the two nations triggered a sell-off across sectors in the Indian equity market this week.
Owing to this, the capital goods sector, along with automobiles and real estate, was among the major underperformers this week. Shares of Larsen & Toubro, Bharat Heavy Electricals, and CG Power and Industrial Solutions were among the worst hit in the sector this week, having lost 5-7% in this duration.
Among these, shares of L&T fell nearly 6% to its lowest level in over two months. Around 30% of the company's projects are linked to West Asia, a research analyst at a domestic broking firm said. As the conflict in the region intensifies, these projects could be halted, affecting the company's business, the analyst said.
Kushal Gandhi, technical analyst at Stoxbox, expects shares of L&T to move sideways in the short term. "Technically, we would want to have certain confirmation on the price action front, but overall the stock looks good. If you are an investor, then we would recommend being invested in L&T," he said. With respect to Bharat Heavy Electricals' stock, Gandhi said, "We feel it's a bit overmatured and the price would require certain confirmation. So, entering at this price wouldn't be ideal."
Meanwhile, analysts expect select companies in the sector to report improvement in margins and growth in key earnings metrics for Jul-Sept, aided by a strong orderbook. In the last few months, there was improvement in revenue visibility from a strong order book, driven by an uptick in private capital expenditure and infrastructure development.
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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:
| Company | Price | Week-on-week change in % | Resistance | Support |
| Bharat Heavy Electricals | 267.60 | (-)6.90 | 278.00 | 257.00 |
| CG Power and Industrial Solutions | 718.75 | (-)5.60 | 753.00 | 698.70 |
| Larsen & Toubro | 3493.95 | (-)5.70 | 3590.40 | 3420.30 |
| Siemens | 7246.85 | (-)0.70 | 7452.40 | 7079.30 |
| Thermax | 5193.25 | (-)0.10 | 5541.00 | 4635.20 |
| S&P BSE Capital Goods | 70301.10 | (-)4.60 | 72149.00 | 68528.40 |
| Nifty 50 | 25014.60 | (-)4.50 | 25673.70 | 24637.20 |
| S&P BSE Sensex | 81688.45 | (-)4.50 | 84032.10 | 80360.80 |
End
Reported by Alina Geogy
Edited by Manisha Baxla
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