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Informist, Friday, Dec. 13, 2024

MUMBAI – Shares of capital goods companies are seen higher next week amid expectations of a sharp rise in capital expenditure by the government in the second half of this financial year. However, analysts said high stock valuations of several companies in the sector are likely to limit gains. 

"Valuations have come off highs, but still remain expensive compared to historical levels," Manish Chowdhury, head of research at Stoxbox, said about shares of railway, defence and power companies. Chowdhury said market participants will give more importance to execution compared to orderbook from the December quarter. A negative surprise on the execution front may lead to a fall in stock prices, he said.

Despite high valuations, capital goods companies are likely to be under investors' radar as the Union Budget is only months away. Further, the slower-than-expected GDP growth in Jul-Sept has raised hopes of a cut in interest rates by the Reserve Bank of India, which is likely to improve overall sentiments in the market.

Emkay Global Financial Services expects a strong recovery in capex by the government going forward. "Defense, roadways, and communication could show a sharp sequential jump (in government capex), whereas railways is, surprisingly, ahead of the full-year run-rate and may not show strong 2H (Oct-Mar) seasonality," the brokerage said. It expects Larsen & Toubro, HG Infra Engineering, Hitachi Energy, Ashok Leyland, and Voltamp Transformers, to benefit from higher capex by the government.

The BSE Capital Goods index rose for the fourth straight week, gaining nearly 11% during this period. The sectoral index rose 0.3% this week, with Titagarh Rail Systems up nearly 10% and Kaynes Technology India up over 8%. 

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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:

End

Reported by Anshul Choudhary

Edited by Saji George Titus

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