Shares of capital goods companies Thermax, Hitachi Energy, and Siemens have fallen by 9% following downgrades and reductions in their target prices.
Motilal Oswal indicates that companies with significant exposure to railways, water projects, road construction, and private capital expenditure will experience a greater impact. In contrast, companies that concentrate more on power transmission and distribution, renewable energy, defense, and higher-growth sectors are in a better position, according to the brokerage.
Arpit Pattnaik
Capex spending targets for the financial year 2026 have been set at ₹11.21 lakh crore, reflecting a 0.9% increase from the budget outlay for the financial year 2025.
On Monday, the BSE Capital Goods index experienced a 4% decline. Shares of Hitachi Energy, Thermax, and Siemens dropped over 7%, making them three of the top five losers on the Nifty 500 index.
Brokerage firm Motilal Oswal has downgraded Hitachi Energy from "neutral" to "sell," reducing its price target from ₹13,300 to ₹10,500. Similarly, Thermax has also been downgraded from "neutral" to "sell," with its price target lowered from ₹4,400 to ₹3,500. Siemens has been downgraded from "buy" to "neutral," and its price target has been adjusted from ₹7,500 to ₹6,300.
In its report, Motilal Oswal noted that private capex in core industries has not shown signs of significant improvement. They expressed concern that the industrial sector may struggle to sustain inflows at the same pace. The brokerage predicts a greater impact on companies that are heavily involved in railways, water, road construction, and private capex. However, firms focusing more on power transmission and distribution, renewables, defense, and other high-growth sectors are expected to fare better.
Given the circumstances, Motilal Oswal advises a selective approach within the capital goods sector, taking into account lower valuations due to reduced government capex and disappointing private capex thus far.
Among large-cap industrials, Motilal Oswal recommends L&T, ABB India, and Cummins India. The price target for L&T has been cut to ₹4,100 from ₹4,300, ABB's target has been revised down to ₹7,200 from ₹8,500, and Cummins India's price target has been reduced to ₹4,100 from ₹4,250. In the defense sector, the brokerage prefers Bharat Electronics, with a price target of ₹360.
Samir Arora of Helios Capital stated, “Of course, the capital goods sector will derate. I have been betting against that because those companies do not deserve 40 and 50 times multiples. Consumer companies have higher multiples for years, and this is consistent in other countries as well; consumer sectors typically have higher multiples than infrastructure and road building or water treatment. This is the reality."
As of now, shares of Hitachi Energy have fallen by 8.2% to ₹11,200, Siemens has decreased by 7.7% to ₹5,310, and Thermax shares are down 7% to ₹3,603.
