India staring at multi-year Capex cycle, US infra stimulus to help

After rallying smartly since September 2020, Industrial stocks are still trading at their long-term average of ~22x two-year forward earnings. These valuations could expand materially as India sits at the cusp of a multi-year Capex cycle, said Bank of America in a recent report. The Capex cycle could further benefit from the infrastructure stimulus planned by the United States.
“Our optimistic view is reflected in 10/16 stocks under our coverage having a Buy rating. We prefer EPC player: L&T, asset owners: Adani Ports, NTPC, product players: Cummins, Bharat Electronics, Crompton, Havells, Voltas, service provider: Concor, for exposure to this theme as we see opportunities for them to expand margins/RoE/valuations,” BofA said.