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Informist, Friday, Dec. 20, 2024

MUMBAI – Shares of capital goods companies are seen to be moving in a range as high valuations are likely to limit gains and may even lead to a further fall despite a positive outlook on earnings growth. Furthermore, there are worries that the government may miss its budgeted target for capital expenditure for the financial year 2024-25 (Apr-Mar).

The government may find it difficult to achieve its capital expenditure target for FY25 as the pace of capital expenditure in the first half was slow on account of the general election and then the extended monsoon season, the head of research with a domestic brokerage said. Further, limited scope for margin expansion and high valuation of several stocks in the sector may lead to muted returns at best in the coming quarters, he said.

These worries led to a sharp fall in several capital goods stocks this week. The BSE Capital Goods index fell over 6%, after rising over 10% during the previous four weeks. Siemens was among the worst-hit stocks in the sector and declined over 10% Friday, extending its overall loss during this week to nearly 13%. Among others, Hindustan Aeronautics and ABB India each fell 10% this week.

Despite concerns over government spending in the near term, analysts are largely positive on the sector in the longer run as the government is likely to continue with its plans for capital expenditure next year too. Analysts expect a slight increase in estimated capital expenditure for FY26 in the next Union Budget in February, as compared to the estimated expenditure of over INR 11 trillion in this year's Budget. For now, market participants await the December quarter earnings to assess if order inflows have actually increased as expected and whether order execution levels remain healthy.

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* RITES bags INR 2.98-bln govt contract for integrated check post construction

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 Rajeev Pai

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