Midcap capital goods stocks to watch out for

Analysts give Moneycontrol their best picks in the midcap capital goods sector even as the BSE Capital Goods Index has outperformed the Sensex by a 2.43 timeson Wednesday. They have also listed new gems and stocks to hold on in this sector.

The BSE CG Index gained almost 141% in one year (January 25, 2005-January 25, 2006) compared to a modest 58% churned by the Sensex in the same period. Analysts sound a bit confused in their readings of the sector’s future, though, they have still not given a sell call on the sector.

Says Kaushal Shah of LKP Shares & Securities, “It’s not entirely correct that the midcap capital goods stocks have completely run out of steam. We are currently advising our clients to maintain a hold or book partial profits on some stocks. We have not yet given a sell call.”

Stocks like Bajaj Electricals , Emco and Bharat Bijlee are on his buy list and a few among the host of stocks that are on hold includes Revathi Equipments , Elecon Engineering , Texmaco , Thermax , Petron Engineering , Manugraph Industries , Kirloskar Pneumatic , Kirloskar Oil and Kirloskar Brothers , Havells India , and Greaves Cotton .

Most of these companies have declared good set of Q3FY06 numbers, Shah points out in support of his hold call. Select stocks from this lot, however, can be accumulated 10-15% below their current market price, he avers.

Sameer Ranade of Pioneer Intermediaries, however, contradicts Shah. The sector has run up extremely sharply is his contention and he expects the sector to remain a market performer unlike in 2005 when it was an outright outperformer.

Pix Transmission Ltd. is his pick in the sector and he has fixed a 18-month price target of Rs 80 giving investors a decent 25% returns. The stock, currently, is available at Rs 62-64 levels.

Urmik Chhaya of Anand Rathi Securities, though, seems to be in consonance with Shah. “The capital goods sector has not yet run out of steam and has got a long way to go. Stocks across the board in this sector are likely to do well this year.” Says he.

Era Constructions , which according to market buzz is likely to win a Rs 100 crore order in the next 10-12 days, and Ansal Properties and Industries are his best picks in this sector.

While the former still has some more steam left in the stock, he says, his 12-month price target for the latter is Rs 600.

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