Mumbai, India – SBI Securities has reiterated its confidence in India’s capital goods sector, naming Bharat Electronics Ltd (BEL) and Larsen & Toubro (L&T) as preferred investment choices despite recent market volatility and profit-booking. The brokerage firm believes the broader capital goods and manufacturing rally still has significant room for growth, particularly in order book-driven segments like defence, engineering, and power equipment.
Defence Sector Leads with BEL
Within the capital goods universe, defence remains SBI Securities' highest conviction call. Analyst Sunny Agarwal noted that defence companies are expected to continue their strong outperformance in earnings delivery, signaling sustained execution momentum. BEL, in particular, stands out, with Agarwal pointing to its robust Q1 performance despite a technical correction in its stock price. This makes BEL a compelling option for investors seeking exposure to consistent defence ordering and clear execution visibility.
L&T's Robust Order Pipeline
L&T continues to be a key recommendation, primarily due to its diversified presence across infrastructure, engineering, and emerging growth areas. The firm’s ability to secure healthy demand for large projects, even amidst a volatile global environment, is a significant positive. Agarwal emphasized that L&T’s order inflows remain very robust, suggesting that geopolitical challenges, such as those in the Middle East, have not materially impacted its project pipeline. This reinforces confidence in the company's revenue visibility for the upcoming quarters.
Selective Value in Power Plays
In the power and ancillary equipment segment, SBI Securities holds a constructive view on Siemens Energy. Despite its recent underperformance, the brokerage suggests that the market may have overreacted, especially given that its quarterly results were largely in line with expectations. Siemens Energy is positioned as a potential catch-up candidate, poised to benefit if sentiment improves around power equipment and grid-linked capital expenditure, offering selective value to investors.
Cummins India: Margin Recovery in Focus
Cummins India rounds out SBI Securities' preferred list, with the investment thesis primarily centered on margin recovery rather than order growth. While the company reported approximately 18% topline growth in Q1, profitability faced pressure due to softening margins. However, SBI Securities anticipates this weakness to be temporary. Agarwal highlighted that Cummins India has initiated price adjustments and expects margins to recover going forward, setting a target price range of Rs 6,000-6,500. This recovery outlook could keep the stock on investors' radar, especially as India Inc. continues to deliver strong overall earnings.