4 Undervalued Capital Goods Stocks to Add to Your Watchlist

#2 Cummins India

Next on our list is the stock of Cummins India.

Cummins India is a leading manufacturer of diesel and natural gas engines. One of the seven legal entities of the Cummins Group in India, Cummins India Limited comprises three business units - Engine, Power Systems, and Distribution.

Cummins India is one of the largest engine manufacturers in India with presence in automotive, industrial, rail, marine, defence and power generation sectors.

Cummins India has good returns ratios, with ROCE of 35.8% and ROE of 26.5%. The promoters of the company hold a 51% stake. Cummins India has a good track record of dividend payments.

For the quarter ending December 2025, Cummins India posted sales of Rs 30,060 m, remaining steady on a year-on-year basis. Domestic sales stood at Rs 25,350 m, reflecting a slight dip of 2%, while exports rose by 2% to Rs 4,710 m.

In recent quarters, the company has concentrated on improving margins through product mix optimization and lowering raw material costs.

For FY26, the management expects to achieve double-digit revenue growth over the previous fiscal year, supported by robust demand across its key segments.

Looking forward to FY27, Cummins India is once again targeting double-digit growth in its domestic operations, similar to its goal for FY26.

However, when it comes to exports, the management has acknowledged the difficulty in making projections due to a variety of factors.

The company is also positive about the opportunities within the data center sector. Contributions from data centers accounted for approximately 25% of power generation revenue, and there remains a strong sense of optimism at the company on the growth potential from this segment.

Overall, Cummins India is benefiting from sustained demand for power generation equipment and industrial engines across sectors such as infrastructure, construction, railways, data centres and commercial facilities.

The domestic business has shown healthy revenue and profit growth, with recent results indicating continued resilience in volumes and margins, supported by disciplined execution.

In the past five trading sessions, Cummins India shares have gained from Rs 4,432 to Rs 4,737.

The stock touched its 52-week high of Rs 4,782.5 on 18 February 2026 and a 52-week low of Rs 2,594.75 on 7 April 2025.

To know more check the Cummins India fact sheet and latest quarterly results.

#3 Jyoti CNC Automation

Next on our list is the stock of Jyoti CNC Automation.

Jyoti CNC Automation is a major Indian manufacturer of CNC (Computer Numerical Control) machine tools - precision machines used in automated metal cutting, milling, turning and machining operations across industries.

It's headquartered in Rajkot, Gujarat and is recognised as one of the largest CNC machine tool makers in the country.

Jyoti's CNC machines are used in sectors like: aerospace, automotive, agriculture, electronics, die & mould, medical, oil & gas, power, railways and general engineering.

The company has decent return ratios of 25.7% ROCE and 18.7% ROE. The promoters of the company hold a 62.55% stake in Jyoti CNC Automation.

On the financial front, the company reported revenues of Rs 5,759 Vs Rs 4,495 m YoY. It reported net profits of Rs 885 m vs Rs 802 m YoY. The management of Jyoti CNC Automation expects Q4 to be much better, given past historical trends.

Moving ahead, to strengthen its presence and capabilities and capitalise on the opportunity for its machines, the company is undertaking a large capacity expansion in India, increasing its manufacturing capacity from current 6,000 machines to 16,000 machines by September this year.

In November 2025, Jyoti CNC Automation expanded its capacities at Huron, its facility in France, almost double in line with its growth plans. This expansion strengthened its manufacturing capabilities and positions the company well to meet rising global demand.

The company has commenced assembly operation at the facility and are seeing healthy ramp-up with material traction expected to reflect from FY27 onwards.

The order intake for 9M FY26 stood was at Rs 16.61 bn. This includes 46% from aerospace and defence, 30% from auto and auto component and 17% from general engineering.

The current order book, remains healthy and well diversified at Rs 45.85 bn, reflecting a steady demand and continued customer confidence.

With the ramp-up of its capacity at Huron, capacity expansion at India coming live in September 2026 and a strong growing order book across sectors; the company expects the coming years to be significantly stronger supported by improved execution, higher deliveries and sustained demand across its key end markets.

In the past five trading sessions, Jyoti CNC Automation shares have gained from Rs 827 to Rs 837.

The stock touched its 52-week high of Rs 1,331 on 2 June 2025 and a 52-week low of Rs 750.2 on 28 February 2025.

To know more check the Jyoti CNC Automation share price and latest quarterly results.

#4 CG Power and Industrial Solutions

CG Power and Industrial Solutions is among the world's leading transformer manufacturers and one of the few companies globally with end-to-end capabilities to design, manufacture, and supply power and distribution transformers and reactors for critical applications.

Its power transformers range from 25 kVA to 1500 MVA across 11 kV to 765 kV classes, and reactors from 10 MVAr to 125 MVAr across 33 kV to 765 kV classes.

The company has very good return ratios of 35.9% ROCE and 25.5% ROE. The promoters of the company hold a 65% stake in CG Power and Industrial Solutions.

On the financial front, the company reported revenues of Rs 31,754 m vs Rs 25,157 m YoY. The net profits of CG Power and Industrial Solutions surged to Rs 2,839 m vs Rs 2,379 m, showing a growth of nearly 20%.

Recently the company has forayed into the semiconductor space and is setting up an Outsourced Semiconductor Assembly and Testing (OSAT) facility, offering comprehensive test services on a global scale.

It is considered one of India's first full-service OSAT facilities, offering both traditional and advanced packaging technologies

The company and its JV partners plan to invest about Rs 76 bn over a five-year period.

Moreover, CG Power and Industrial Solutions has also successfully acquired the Radio Frequency (RF) components business from Renesas and set up Axiro Semiconductor - a fabless design company focused on delivering high-performance and scalable semiconductor solutions.

CG Power and Industrial Solutions recently secured a landmark order valued at Rs 9,000 m from Tallgrass Integrated Logistics Solutions LLC USA, for a large-scale data center project in the United States.

This order represents a strategic milestone, marking the company's entry into the global data center segment, one of the fastest growing segments. This is the largest single order ever won by CG Power and is a direct export order for the supply of power transformers.

Overall, the company's prospects look positive given strong core demand, improving export presence, and a strategic move into semiconductors.

In the past five trading sessions, CG Power and Industrial Solutions shares have gained from Rs 685 to Rs 712.

The stock touched its 52-week high of Rs 797.75 on 17 September 2025 and a 52-week low of Rs 518.35 on 7 April 2025.

To know more check the CG Power and Industrial Solutions fact sheet and latest quarterly results.

Should You Consider Capital Goods Stocks?

Investing in capital goods stocks can be a strategic move in 2026, as this sector serves as the backbone of industrial and infrastructure growth.

With significant government budget allocations-such as the Rs 12.2 trillion infrastructure boost in India-and a global push for energy transition and automation, these companies are often at the forefront of economic expansion.

These stocks are typically pro-cyclical, meaning they thrive when the broader economy is growing, making them attractive for long-term investors looking to participate in manufacturing-led development.

However, the sector is also sensitive to interest rate fluctuations, global trade tariffs, and raw material costs, which can introduce significant volatility.

Investors should assess order book quality and visibility, revenue growth consistency, operating margins, return on capital employed (ROCE), return on equity (ROE), debt levels, cash flow generation and management execution track record.

Valuation discipline is equally important because buying strong companies at excessive prices can limit returns even in a favourable cycle.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...