The brokerage firm Nomura has laid out its capital goods sector picks in its latest report for the first quarter of FY26. Although order inflows for the overall coverage universe slipped by 5% year-on-year (YoY) to Rs 92,000 crore, the brokerage sees strength in select segments such as power transmission and distribution, defence electronics, and buildings & factories (B&F).
Let’s take a look at what is driving this shift and where the brokerage sees the strongest potential.
Nomura on capital goods: Power and defence leading the pack
According to the brokerage report, order inflows from L&T, one of the biggest players in the space, declined 18% YoY. “We expect the decline in L&T’s order inflows to have been partly offset by 30% y-y growth in order inflows for our coverage universe, ex-L&T, driven by Bharat Electronic (Buy), KEC International (Buy), and Hindustan Aeronautics (Buy),” added the brokerage in its report.
Bharat Electronic, for instance, is expected to have clocked a 48% YoY rise in order inflows to Rs 7,350 crore. “This is on expected lines,” Nomura added, “as BEL had faced order slippages in FY25, and management had indicated that missed orders worth Rs 6,000 crore would be signed in April 2025.”
KEC International is also expected to post strong inflow growth of 33% YoY, coming off a low base. The uptick is led by traction in both its power transmission and distribution, and Buildings & Factories (B&F) segments.
Nomura on capital goods: Short-cycle momentum – ABB, Siemens steady
Short cycle capital goods players like ABB and Siemens are expected to show moderate growth. Nomura projects 9% and 10% YoY rise in order inflows, respectively, in Q1FY26.
Siemens, in particular, stood out with a key win. “In Q1FY26, Siemens, as part of a consortium, won an order from the National High Speed Rail Corp to implement European Train Control System (ETCS) Level 2 technologies in India’s first high-speed rail project,” the brokerage noted.
Meanwhile, CG Power is likely to report a 17% jump in inflows, buoyed by a Rs 641 crore transformer package order from Power Grid Corporation of India.
On the weaker side, Afcons is expected to see muted order inflows of Rs 1,300 crore, down 7% quarter-on-quarter.
Nomura on capital goods: Cautious outlook for fresh capex
Despite sector specific wins, a broader capex recovery still seems distant. CMIE data cited by Nomura shows that while new investment announcements surged 42% YoY to Rs 3.6 trillion in Q1FY26, this was mostly a result of the low base in the previous year.
“Corporate India continues to exhibit caution and hesitancy in undertaking fresh capex,” the brokerage noted. The Business Expectations Index (BEI) for Q2FY26, at 117.5, is the lowest in four years.
Nomura on capital goods: Execution outlook
L&T is expected to clock 18.5% YoY growth in its core business execution, led by the hydrocarbon and hi-tech manufacturing verticals. On the other hand, Bharat Electronics and Hindustan Aeronautics are likely to report Rs 4,800 crore in revenue for Q1FY26, marking 15% and 11% growth, respectively.
KEC International’s revenue may rise 12.5% YoY, again powered by T&D and B&F segments.
CG Power and ABB are expected to report revenue growth of 23% and 10%, respectively. Cummins India could also deliver a 13% revenue rise.
Top buys according to Nomura
As per the brokerage, the top capital goods picks in its coverage universe are:
CG Power (Buy)
GE Vernova T&D (Buy)
Hindustan Aeronautics (Buy)