The sharp fall in the Indian equity benchmarks makes it an opportune time to enter into the stock market with picks from the engineering and construction sectors.
That's the advice coming from global brokerage firm, Jefferies, which bets on a recovery cycle over the next 12 to 18 months on the back of capital expenditure announcements, especially in metals, in the Union Budget.
Equity markets across the globe have been on downward spiral in the last couple of days, heavily impacting the domestic indices, which were already reeling under selloff due to the Budget bringing back the long-term capital gains tax on equity investments and poor third quarter earnings.
Here are the top picks five picks of Jefferies:
Larsen And Tourbro
Growth in order flow is expected to set the path for the engineering major's margin recovery in the engineering and construction segment.
The order flow potential for the next financial year stands at $19 billion; wherein $2-billion worth of orders will come from railways, another $2 billion from expansion in the country's major steel companies such as Tata Steel Ltd. and JSW Steel Ltd., and the rest from the defence sector, according to the Jefferies' report.
The company's construction arm recently bagged orders worth Rs 2,275 crore from Bangalore Development Authority, according to a report in newswire PTI.
Hence on the back of a healthy order flow potential, L&T makes it to one of the top picks of Jefferies.
ABB
In the coming 12 to 18 months, growth in its order book will see revenue recovery and margin expansion. This, according to Jefferies, will lead to a compounded annual growth rate of 47 percent in the company's earnings per share, driving a potential upside in the stock from current levels.
Voltas
Recovery in the engineering business and the air conditioning segment provides an upside potential to the stock.
KEI
The transformation of KEI Industries into an engineering procurement construction company in the past decade placed the company “in the right business growth segments.”
“The company is a play on housing, capex and also engineering exports in India, which adds to its appeal,” the report said.
BEL
Jeffeires upgraded Bharat Electronics to ‘Buy', as “a strong order book provides a good entry point in the stock.”
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