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Informist, Friday, Feb. 21, 2025

MUMBAI – Shares of capital goods companies are expected to move in a range next week due to lack of any significant sector-specific triggers. The market has already discounted the likely impact on the sector from the small on-year increase in the government's capital expenditure for 2025-26 (Apr-Mar), a senior analyst at a top domestic brokerage firm said.

While the government's capital expenditure drive is below expectations, the transmission and distribution segment and urban development sectors will still see good traction, the analyst said. "Shares of the capital goods companies have already corrected to a reasonable level and they should likely see some consolidation," the analyst said. Capital goods stocks fell due to their high valuations and disappointment around the muted growth in the government spending programme, he added. The Union Budget for FY26 was below expectation as the capex allocation was pegged at INR 11.21 trillion, up only 10% from the revised estimate of INR 10.18 trillion for FY25.

As the market has already absorbed the disappointment around muted capex growth, valuations have come down so capital goods stocks have some upside potential despite expectations of lower growth next financial year, the analyst said. Heavyweight Larsen & Toubro will likely post an over 15% growth in the coming financial year, the analyst said. The conglomerate's revenue grew 18% on year during the nine months ended December and 21% in the previous financial year.

L&T, Engineers India, KEC International, and Kalpataru Projects International are some of the stocks in the sector whose valuations are attractive as of now, he said. L&T currently trades at 28.6 times the estimated earnings for FY25 compared to 31.2 times as on Jan. 31, according to data available with Informist based on estimates from 13 brokerages.

BSE Capital Goods index on Friday closed at 58398.81 points, down 0.1% from Thursday. The index lost 1.8% this week and 9.5% in a month. Almost all the index constituents are down from a year ago, with only AIA Engineering being an exception. The stock is up 0.2% from a year ago. Share prices of Kaynes Technologies, Praj Industries, Carborundum Universal, Titagarh Rail System, Kalpataru Projects, Siemens, and ABB India are down 41-24% from a year ago.

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* PTC Industries Oct-Dec consol PAT rises 76.2% YoY to INR 142.43 million
* Birla Cellulose in pact with RSWM, TACC to develop graphene tech for textile
 

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 Ashish Shirke

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