More Stories

Informist, Saturday, Feb. 1, 2024

MUMBAI – Shares of capital goods companies may face selling pressure as the capital expenditure allocation in the Union Budget for 2025-26 (Apr-Mar) was lower than expected. The Budget on Saturday projected the central government's capex for FY26 at INR 11.21 trillion, up 10% from the revised estimate of INR 10.18 trillion for FY25. 

While the government's capex drive is below anticipation, the overall budget is not negative, an analyst at a global brokerage firm said. If the consumption stimulus due to the tax break announced in the Union Budget materialises, it will increase the capacity utilisation of consumption-led companies, triggering a rise in private capex in two-three years, the analyst said. However, the plateauing of government spending could be pain for the capital goods companies in the near term.

For the railway sector, the government is focussing more on track renewal and safety over locomotive packages, the analyst said. The Budget pegged the capex for Indian Railways at INR 2.65 trillion for the next financial year, unchanged from the revised estimate for the current fiscal year. 

On the other hand, Seshadri Sen, research head at Emkay Global Financial Services Ltd. said in a post-Budget interaction with analysts that preference wpould shift to the consumer discretionary universe and move away from the industrials and manufacturing sector. He expects this to be the point where the market pivots to consumption-led stocks from companies that have benefited from the government's capital expenditure drive in recent years. 

Investing in Larsen & Toubro is a good way to stay invested in the theme so that one does not miss out in case there is a positive surprise, Emkay Global said. However, small-cap and mid-cap capex-driven stocks that have seen valuations soar may see some corrections, the brokerage added.

The allocation of INR 200 billion for a dedicated Nuclear Energy Mission, alongside the development of Bharat Small Reactors is a game-changer for India's energy landscape, SAMCO Securities said in a note. "Companies like Larsen & Toubro (and Bharat Heavy Electricals Ltd. are set to benefit from this initiative," SAMCO said. The plan to achieve 100 gigawatts of nuclear energy capacity by 2047 provides a notable boost to the capital goods sector with increased investments and opportunities in nuclear infrastructure and technology, Shruti Jain, chief strategy officer at Arihant Capital Markets Ltd., said in a note.
 

The government directed infrastructure related ministries to come up with a three-year pipeline, which is to be developed under a public-private partnership. It is now a wait-and-watch situation as it will all depend on whether companies in the capital goods sector manage to get some orders due to the increase in consumption, an analyst at a domestic brokerage firm said. While there could be some near-term negative impact on stocks in the sector, it will not be much, he added.

The finance minister also announced setting up an 'Urban Challenge Fund' of INR 1 trillion to implement several proposals for the development of cities announced in the previous Budget. This could result in some water-irrigation projects, an analyst at the global brokerage said. 

BSE Capital Goods index on Saturday closed at 62581.73, down 3% from the previous close. The index is up 0.6% from the closing of the previous week. Most in the index ended in the red on Saturday. Among major players in the sector, Cummins India Ltd., will report its quarterly earnings on Wednesday.

TOP HEADLINES

* HBL Engineering consortium gets INR 4.10-bln order from Western Railway

* Qatar court annuls INR 2.39-bln penalty levied on L&T, calls it 'arbitrary'

* Analyst Concall: May surpass 10% order inflow growth guidance for FY25 - L&T

* L&T says co needs INR 700 bln-INR 800 bln in Jan-Mar to attain FY25 guidance

* Analyst Concall: Voltas carry forward Dec-exit order book at INR 68.18 bln

* IRCON Intl secures road project contract worth INR 6.31 bln in Manipur

* Earnings Review: L&T earnings steady, but miss Street's view on sales, PAT

* Praj Ind Oct-Dec consol PAT falls nearly 42% YoY to INR 410.97 million

* L&T's minerals, metals vertical gets 'significant' order from GCC

* Earnings Review: Voltas PAT misses Street's view, revenue up 18% on year

* Analyst Concall: Suzlon Energy to continue to focus on high quality orders

* Earnings Review: BHEL sales growth stays strong, at highest level in 10 qtrs

* Earnings Review: BHEL sales strong 2nd qtr in a row, highest in 10 quarters

* Earnings Review: BHEL revenue strong for 2nd qtr in a row, hits 10-qtr high

* Syrma SGS Oct-Dec consol PAT rises over threefold YoY to INR 487.94 million

* Earnings Review: Volume spurt almost doubles Suzlon Energy Oct-Dec earnings

* V-Guard Oct-Dec net profit rises 3.2% YoY to INR 480.9 million

* RITES Oct-Dec PAT falls 19.9% on year, sales down 16.6%

* L&T wins 'significant' order to build AI-enabled data centre in Uzbekistan

* Maharashtra Seamless Oct-Dec consol PAT falls 32.6% YoY, sales fall 1.6%

* L&T named preferred EPC contractor for solar gigascale project in Abu Dhabi

* KEC Intl gets INR-14-bln transmission, distribution orders from Power Grid

* Aditya Birla Real Estate arm, Mitsubishi Estate in JV for Bengaluru project

* Marelli-Samvardhana JV to sell fixed assets, inventory to Gabriel India

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 Aman Aryan

Edited by Avishek Dutta

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.