Capital goods stocks may re-rate on Govt capex push, firm demand: Analysts

Inflation remains a key risk for margins amid geopolitical tensions. But, analysts expect this to improve from the second half of FY23 due to declining commodity prices and strong order inflows

Stocks of capital goods companies could see a positive re-rating in the medium-term as the sector is poised for healthy growth in fiscal 2022-23 (FY23) on the back of the government’s strong capital expenditure (capex) push, analysts say.

They believe that increased allocation to government capex in the latest budget coupled with centrally sponsored schemes (such as PLI) is likely to augur well for the sector going ahead.

Those at HDFC Securities, for instance, believe that spending plans across large verticals such as roads, railways, defence, and power provide long-term visibility to the government's capex plans. This, along with welfare