www.rupeedesk.in
Stocks of most capital goods and engineering companies are likely to trade in a thin range with a negative bias next week, mirroring the weak trend in the market. Trade is likely to remain choppy ahead of the expiry of the December futures contract, and as investors roll over positions to the January series. A grim outlook for the sector as fundamental issues like fuel linkages, funding, environmental and forest clearances, and land acquisition remain unresolved. Improvement in order inflow for the power sector is still not visible, with new project announcements in H1FY13 (Apr-Sep) contracting 57% YoY (year-on-year). With diminishing order inflow, working capital is likely to further deteriorate leading to declining margins and return ratios. In its mid-quarter policy review on Dec 18, the Reserve Bank of India kept its policy rates unchanged against industry-wide hopes of a rate cut in order to bring down the high finance costs, which are making clients defer their expansion plans.
Thermax Managing Director M.S. Unnikrishnan had said the RBI cannot delay cutting down interest rates beyond January. He said RBI should take a softer stance in its next policy review in January for investment to pick up. Espirito Santo Securities has advised investors to sell stocks of Thermax, Bharat Heavy Electricals, and BGR Energy Systems in the near term.
