Capital Goods Stocks Outlook for the week: 17.09.2012 - 21.09.2012

[rupeedesk]

Stocks of most capital goods and engineering companies are seen tracking the broad market next week, and will also take cues from the Reserve Bank of India's mid-quarter policy review that will be detailed Monday. Most shares in the segment are seen trading with a positive bias, in line with the Street.

Market participants do not expect the central bank to cut the repo rate, the rate at which it lends to commercial banks, but are looking forward to the

tone of its commentary.

The alleged coal block allocation scam may, however, weigh down select capital goods stocks if the Supreme Court de-allocates any coal blocks allotted to private power producers that have placed orders with power equipment manufacturers. For BHEL, orders of around 16,150 MW from nearly 16 private companies are at stake.

Most capital goods companies, facing stiff competition from overseas firms, were keenly eyeing imposition of the import duty. But exemptions made by the government are seen as a dampener. In a report dated Sep 12, Bank of America Merrill Lynch said Indian vendors such as L&T and BHEL have lost the opportunity to supply equipment for projects totalling 106,000 MW as these were approved before Jul 19.

The report also said orders worth 36,000 MW would also be lost for Indian equipment manufacturers due to the exemption on mega power projects coming up in the 12th five-year plan.

By RUPEE DESK

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