L&T’s October-December quarter (Q3FY20) results were below consensus estimates due to a 5 per cent decline in the infrastructure segment revenues on account execution hurdles such as ban on construction activity in national capital region (NCR) and political headwinds in Maharashtra, among others.
Meanwhile, the S&P BSE Capital Goods index hit an intra-day low of 16,281 and was trading close to its 52-week low level of 16,225, touched on August 23, 2019 in intra-day deal.
According to analysts at Emkay Global Financial Services, most companies in engineering and capital goods (ECG) universe highlighted deteriorating macroeconomic trends and strained government finances, affecting order outlook, execution challenges and working capital stress emanating from a tightened liquidity situation.
“Despite the declining growth visibility and rising challenges on working capital, we have not seen the stocks correcting much in the sector. We believe that continued order inflows and execution disappointment will result in a de-rating of stocks in the sector, and accordingly, we keep our bearish stance on the sector”, the brokerage firm said in capital goods sector report.