Capital Goods Stocks Top Picks - Global Jitters, Local Winners: Valuations Reset, Fundamentals Intact

Recent global jitters—driven by tariff uncertainties, slowing global growth expectations and risk-off sentiment—have disproportionately impacted Indian capital goods stocks with export exposure. While near-term volatility is undeniable, we believe the current share price correction adequately factors in these risks. Importantly, fundamentals remain resilient across much of our coverage. TD Power Systems continues to benefit from a demand-supply mismatch in industrial generators, providing strong earnings visibility. Inox India’s diversified end-market exposure and limited sensitivity to US tariffs offer relative insulation, while KSB and ESAB remain largely domestically anchored, supported by India’s capex and infra cycle. While Anup Engineering and Triveni Turbine have seen some moderation in performance due to higher export exposure, and valuations largely pricing in the downside, a meaningful operational recovery may take some time. Overall, forward valuations have corrected meaningfully, improving downside protection and setting the stage for earnings-led re-rating as macro concerns stabilize. Top picks from our coverage includes TD Power Systems, Inox India, and KSB.

TD Power Systems:

Global OEM commentary points to a strong, multi-year upcycle in gas turbines and generators, driven by surging electricity demand—most notably from data center buildouts, grid expansion and industrial applications. This environment is structurally positive for TDPS, given its leadership in industrial alternators where demand is currently outstripping supply. With global turbine OEMs reporting record backlogs, capacity constraints and improving pricing, TDPS is well placed to see sustained order inflows, high plant utilization and healthy margin traction. The company’s strong order book, improving execution visibility and favorable industry supply-demand dynamics underpin confidence in robust operational performance over the medium term. Recent share price correction, largely driven by macro and export-related concerns, appears disconnected from fundamentals. Near-term, we estimate strong Q3 growth driven by robust order intakes, backlog, stable margins, and added capacity from the new Tumkur facility. At current levels, valuations look materially more reasonable (27.0x FY28E P/E), offering an attractive entry point to build positions in a business benefiting from a clear structural demand tailwind.

*CMP is as per report published date

Inox India:

LNG adoption as a transport fuel remains gradual, with PSU-led station rollouts progressing slower than earlier expectations; however, private initiatives from Ultra Gas and Greenline keep medium-term optionality intact. Against this backdrop, the company’s fundamentals remain strong, supported by a well-diversified end-user base, resilient demand for industrial gases, and growing presence in LNG and cryo-scientific segments. Limited exposure to US tariffs has aided relative share price stability, underscoring its defensive character. Any favorable policy push to incentivize LNG transport could provide meaningful upside. At current levels, valuations (26.3x FY28E P/E) offer a reasonable entry point to build positions in a fundamentally robust, downside-protected franchise.

*CMP is as per report published date

KSB Ltd:

KSB’s fundamentals remain strong, anchored by steady growth in industrial pumps and valves broadly tracking GDP and supported by a robust domestic focus. The passage of the SHANTI Bill, targeting a sharp expansion in nuclear capacity from 8.8 GW to 100 GW by 2047, structurally expands the opportunity set. KSB’s proven credentials with NPCIL, including supply of critical primary coolant pumps, position it well to benefit from upcoming nuclear buildouts. While private sector participation may raise competition, the significant expansion in TAM is a net positive, supporting stronger term growth. Recent share price correction offers an attractive entry point (33.6x CY28E P/E) to build positions.

*CMP is as per report published date

*CMP is as per report published date

*CMP is as per report published date

*CMP is as per report published date

Click to download the full Capital Goods Stock Top Picks for 3QFY26 Update

Analyst:

• Mohit Surana - Research Associate, Institutional Equities (NISM-202300189881)
• Mohd Haris - Research Associate, Institutional Equities (NISM-202400161268)

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FAQs on Capital Goods Stock Top Picks for 3QFY26

Investors tracking capital goods stocks amid global volatility often seek clarity on downside risks, valuation comfort, and near-term trading opportunities. Below are focused answers to key sector-specific questions.

1. Why are capital goods stocks correcting despite strong fundamentals?

Global tariff uncertainties, slowing growth expectations, and risk-off sentiment have led to broad-based corrections, particularly in export-linked stocks, even as domestic fundamentals remain intact.

2. Is this correction a swing trading opportunity?

Yes. Valuations have reset meaningfully, improving downside protection while strong order books and earnings visibility provide scope for tactical upside as macro sentiment stabilizes.

3. Why is TD Power Systems a top pick?

TD Power Systems benefits from a structural demand-supply mismatch in industrial generators, strong order inflows, improving capacity utilization, and favorable global OEM dynamics.

4. How does Inox India offer downside protection?

Inox India’s diversified end markets, resilient industrial gas demand, and limited exposure to US tariffs lend defensive characteristics despite slower LNG transport adoption.

5. What supports KSB’s long-term outlook?

KSB’s domestic focus, steady industrial demand, and potential upside from nuclear capacity expansion support sustained growth visibility.

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