Capital Goods Stocks Outlook: 30.07.2012 - 03.08.2012

[rupeedesk]

Capital Goods Stocks Outlook: 30.07.2012 - 03.08.2012

                  Stocks of capital goods and engineering companies are likely move in a narrow range ahead of Reserve Bank of India's first-quarter monetary policy review on Tuesday. Treasurers, fund managers, and economists, a majority expects the RBI governor to keep the repo rate unchanged at 8.0%. High interest costs have been hurting Indian capital goods and engineering companies for a while now. RBI has hiked the repo rate, at which it lends to banks under its liquidity adjustment facility, by a cumulative 175 basis points since January 2011. High interest rates, coupled with industrial slowdown, and paucity of orders have strained the operating margins of these capital-intensive engineering and construction companies. Stocks of Suzlon Energy are likely to be in focus Monday as the company yesterday redeemed outstanding foreign currency convertible bonds worth $360 mln.

                IRB Infrastructure stocks are also likely to see an uptick as the company posted higher-than-estimated net profit and net sales for Apr-Jun. The company is likely to face headwinds in the coming quarters due to the various structural issues faced by the company such as lack of clarity on fuel linkages, over-capacity in the boiler, turbine, and generator space, and hurdles in obtaining environmental clearances and land acquisition.

By RUPEE DESK

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