Capital Goods Stocks Outlook for the week (16-20.07.2012)
Stocks of capital goods and engineering companies are seen
moving in a narrow band next week, with stock-specific action in the absence of
any major triggers. We continue to maintain a cautious view on the sector
given the multiple issues plaguing the capital goods and engineering space.
Limited orders, high interest rates, land acquisition and environmental
clearance hurdles, policy inaction, and an overall industrial slowdown are
keeping investors at bay from the capital goods and engineering space.
Industrial growth data released by the Central Statistics Office Thursday showed capital goods output fell 7.7% in May versus a growth of 6.2% a year ago. We expect the capital goods sector to continue with its subdued performance in the June 2012 quarter. New order inflows, key growth driver for the industry, have remained lukewarm. Since the demand for capital goods is derived from other sectors such as power, infrastructure, and mining, among others, the growth of the sector would depend on the conditions of these sectors.
