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    Volatility is temporary, fundamental tailwinds are permanent: 6 stocks from engineering sector with an upside potential of up to 37%

    Synopsis

    If one looks at how one sector after another has been recovering, engineering which overlaps in some part with capital goods has been one of the last ones to see a recovery in real business sense. It is only in the last few months that one would these companies announce that either they have got orders or any other sort of other contracts. If one looks at the orders or contract wins, a number of them are showing quarter on quarter increase for almost the three quarters. There is a reason why these companies were last on the list to show revival. Only when the user industry which in this case ranges from chemical, and sugar railways to literally everyone else involved in manufacturing and utilities embarks upon a capacity expansion only then these engineering cum capital good companies would get orders and show an improvement. In the first phase of economic recovery, it was more of repairing both balance sheets and policy framework that took place. It is only recently that we have seen companies get confident and a new capex cycle getting started. Probably that is why some of the mid-sized players have been able to outperform even a volatile market.

    In volatile market conditions which have clear bias towards bears, when one is looking at a sector or industry. one must delink between what is happening to the indices and what is happening fundamentally in the sector one is looking at. If one does not do it then there is a high probability that one might end up missing something important on which decision to buy or sell should be made and that is what is happening fundamentally in a sector.
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    The Economic Times