Current Nifty PE, PB ratios evoke signs of 2006-08 capex cycle: Jefferies

Industrial and power stocks have seen a rally over the past one to three years, said international brokerage Jefferies.

Investors should look at the previous upcycle multiples along with the 2010 downcycle period. Currently, the frontline index Nifty 50’s PE is trading at a 35 percent premium to 2006-2008 multiples. However, the PB ratio is at some discount.

This reflects the last capex upcycle peak, with similarities drawn between the two periods.

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There is a similar difference in L&T, NTPC, and Power Grid, which further adds re-rating potential to the counters. Jefferies retained its neutral stance on Siemens India, but said that ABB India is showing some potential downside.

On December 17, Jefferies said its top picks in the industrial sector, include Larsen & Toubro and Siemens. These selections are based on strong order flows observed in the second quarter.

The growth in infrastructure and industrial capital expenditure is being driven by key sectors such as Power Transmission, Railways, Data Centers, and the Production Linked Incentive (PLI) initiatives.

Jefferies highlighted that L&T holds a favourable position in both the Middle East and domestic markets. Siemens may benefit from the recovery in its Power Transmission and Distribution (T&D) division, according to Jefferies.

Over the past six months, L&T shares have seen a gain of around 25 percent, while Siemens India has risen around 24 percent. Despite Jefferies’ negative outlook, ABB India has outperformed, rising about 32 percent during the same time period.

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