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Informist, Friday, Mar. 21, 2025

MUMBAI – Stocks in the capital goods sector will likely see sub-sector specific price actions. Unlike the situation two years back when every other stock in the sector used to give good returns, investors will now likely be selective about the sub-sectors, a research analyst at a domestic brokerage firm said. "Earlier, people used to pick any stock in the capital goods sector, but now the situation has changed," he said.

The sector is very diverse and each segment may turn out to behave differently, he said, adding that power transmission and distribution segment is expected to post a robust performance going forward due to the push for the renewable sector. However, in the railways segment, the government is more focused on in-house manufacturing of train sets, and only ancillary providers have more opportunities, the analyst said.

Shares of wires and cable makers, on other hand, are likely to face more selling pressure next week as the Adani group recently announced its plans to foray into the segment by setting up a joint venture, Praneetha Ecocables. With the entry of Adani group and UltraTech in the segment, competition is expected to increase for the current players, affecting their profitability, the analyst said. Margins of existing companies in this segment will likely take a 100-basis point hit due to the rise in competition.

With these visible challenges, valauations of wire and cable stocks are expected to de-rate as it will not be easy for these to justify their high premiums, the analyst said. After Adani group announced its foray Thursday, shares of KEI Industries declined 15% to hit a lower band and was among the worst hit Nifty 500 constituent. KEI Industries, Polycab India, and Havells India snapped their three-day winning run after the news. 

However, an analyst at another brokerage firm said the margins might only see an impact by 2029-30 (Apr-Mar). "At first the Adani group will use for their own requirements, after which they will tap to the general market," the analyst said. From now on, the companies in the wire and cable segment might only see an uptick in share prices as their valuations have already come to a reasonable level, the analyst said.    

The BSE Capital Goods index closed in the green for the fifth straight session on Friday. The index ended at 61901.78 points, up 1%. The sectoral index has gained 7.2% this week. Almost all the index constituents rose this week, barring Polycab India which fell 0.2%. Bharat Dynamics and Grindwell Norton are up 17-18% this week. 

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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 Aman Aryan

Edited by Akul Nishant Akhoury

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