The Hindu Business Line : BSE Capital Goods index hits all-time high

Mumbai, June 29 Positive macroeconomic factors coupled with strong order book positions for most capital goods companies pushed up the BSE CG Index to its life-time high of 12,329.2 points on Friday. The index closed at 12,299.36 points, up 227.81 points or 1.89 per cent.

Analysts said almost all of the 28 companies listed in the index have strong orders; this has improved visibility for the companies for the next two-three years and driven the stocks up.

“Companies in the capital goods space have been performing well for the past one year now. The banking, auto, and metal stocks have been constantly hit by some negatives while the capital goods sector has not seen many negative factors at play. This has turned market attention towards these companies,” said Mr Mukul Jain, capital goods analyst, Prabhudas Lilladher Securities.

The high demand in the power and infrastructure sectors has helped the companies bag a large number of orders, said analysts.

“There is shortage of power in the country and in the Eleventh Plan, it has been decided to generate three times the power that was generated in the Tenth Plan. Thus, power companies and power equipment manufacturing companies will bag huge orders,” said Mr Shailesh Kanani, capital goods analyst, Angel Broking.

The BSE capital goods index has gained 83.99 per cent over the past year and analysts expect it will continue to outperform the Sensex for the near term.

Economy boost

“The overall economy is doing well which has led to the power, engineering companies in the capital good space to perform well,” said Mr Umesh Karne, capital goods analyst, Emkay Shares and Stock Brokers.

The good quarterly performance which was better than market expectations has also helped the companies. “These companies are also enjoying better margins currently,” said Mr Kanani.

However, analysts said, currently most companies were over-valued as the rally has been persistent for quite some time now.

For those in power equipment, one concern is whether the expected power generation capacities will be established, said analysts.

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