Apart from the increasing pace of vaccination, the market sentiment is also upbeat with continued support from RBI and Government of India.
“India’s domestic and external dynamics remain strong with both the government and RBI taking appropriate policy decisions that will continue to act as a tailwind along with the economic recovery. share Market performance,” says Hemant Kaanawala, Head – Equity, Kotak Mahindra Life Insurance.
While Nifty is able to climb up to 17,600 levels, which is the upper end of the ascending channel, technical analysts were expecting this pause. As mentioned in the last week, Nifty may drop to its support band of 17,000 – 17,170 before climbing back to 17,600. 17,170 is now a good support as it was a major resistance earlier. Despite Nifty going up, Nifty remains 17,000 key points for put option writers. For example, open interest at 17,000 is placed at 84,843 contracts, while 23,223 contracts are placed at 17,100, 36,725 contracts are placed at 17,200 and 34,263 contracts are placed at 17,300. As metal prices are still trading higher (for example aluminum prices recently hit a 13-month high), the next bullish momentum could be triggered by metal stocks.
(Narendra Nathan / ET Office)
Sector Update: Engineering & Capital Goods
Tender showing signs of accelerating
April-August tendering grew 13% year-on-year on the back of higher tendering in Power, T&D and Road segments. While the tender in the rail section was flat, water and real estate saw a decline. The road segment had the largest share of tenders, accounting for 30% of the total tenders. The share of water/railway/irrigation tenders in the total tenders was 11-14%/8%/6-14% during the period April-August. For July-August 2021, the pace of tender activity exceeded April-June 2021 levels (up 15%) on account of road, power equipment, railways and water supply, indicating a healthy pickup in capex activity .
award giving activity
YTD awarding activity grew over 67% year-on-year on a low basis. The 2-year CAGR for this period was 28%. Roads/Power T&D/Railways/Real Estate witnessed strong growth. The 2-year CAGR for the tenders was 14%, excluding the road segment. Besides roads, railways/electricity distribution segments have also witnessed strong growth in recent years. Roads/Railways constituted 26%/16% of the awards during April-August. Due to a sizable prize won by BHEL (Rs 108 billion by Atomic Energy Corporation of India), power equipment awards have grown 6 times in the second quarter, leading to an 18% increase in the overall awards during the period, which is further supported by roads. water supply.
center and state capex
For the period April-July1, the central government achieved 23% of its annual budget target of Rs 1.28 trillion (an increase of 15% year-on-year). While the central government’s overall capital expenditure growth during April-July remained in the mid-teens, key ministries, roads and railways registered a growth of 110 per cent and 22 per cent, respectively. Taking cues from such figures, developing these sectors apart from defence is the top priority of the government. Additionally, state government expenditure (top 15 states) during the current financial year has been much higher than last year’s expenditure of Rs 565 billion (Y-o-Y over 100%) (12% of BE has been achieved vs. 7% annually). On a combined basis (Central + State), capital expenditure growth stood at 34% year-on-year.
Credit growth to industries grew marginally by 0.1% as of July 2021, while infrastructure credit grew by 2.5%. At Rs 10.8 trillion, the outstanding infrastructure debt is close to a historic high, though it has been in the range of Rs 10-11 trillion for the past two years. Overall industrial credit outstanding (as a % of non-food credit) has gradually declined to 26% by July 2021 and is currently at a decade low. Top Picks from Emkay Coverage Our top picks in this segment are L&T, KEC International and Kalpataru Power Transmission, given their superior execution capabilities, existing order backlog and relative valuations.
(MK)