Coming out of earning season with the Sensex hitting all time highs, the infrastructure pack has been running up. Examining the fundamentals and technicals, Vibhav Kapoor of IL&FS and technical analyst Rajat Bose discuss the infrastructure space.
Vibhav Kapoor likes IVRCL amongst the construction companies. He says that it has consolidated before this current run up for quite sometime. "Probably they had become a bit expensive earlier, but now that two quarters of the year are over and probably another quarter down the line we should be looking at FY08 numbers, they do not look as expensive."
"That is probably one reason why these stocks are beginning to run up," he adds.
He says that for the past few months the orders on the road construction side had actually dwindled. "Yesterday quite a few orders or quite a few decisions have been taken on the further expansion of the four-laning and the six-laning of the road network. So that is going to help a lot of these companies."
Kapoor believes that these companies have the potential to move up over the next six months or so. Apart from that, in the other sectors in the infrastructure space, he feels that some of the power equipment companies look good.
"Although they are probably expensive, we have a huge number of power projects, mega power projects coming up to be closed over the next six months or so. So all in all, I think the infrastructure space continues to look very interesting," he says.
Kapoor further states that one has to select the right stocks and be a little careful about what valuations they are paying. "At every decline, these are stocks which need to be accumulated."
Getting more specific about stocks in the infra space, Rajat Bose mentions GMR, AIA Engineering and IVRCL. He says that after a short correction in between, GMR has once again started moving up. However, he is a bit skeptical about this stock.
"Basically, this run is somewhat vertical, and I do not have much confidence to buy at current levels. But if somebody is holding this stock for sometime or holding a futures contract for sometime, then one can still carry on with that," he says.
He advises to patiently watch out for AIA Engineering. "It has been moving up for quite sometime, so it is difficult to say whether the move has already matured or not. But there is risk involved in buying at these current levels.
Meanwhile, he is more positive about IVRCL. "It would be a good play, it is not as vertical as the other two are."
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