Capital Goods Sector OUTPERFORMING the Markets

Originally Posted by TATrader

Good call on the Capital Goods Sector, Traderji!

The Capital goods index closed at a life-time high on the hopes of positive announcements for the sector in the Budget for 2005-06.

The capital goods index was the largest gainer on Friday, surging 26 points compared with a 4.49 point drop in the Sensex. The index hit an all-time high of 3355.33 during intra day trade, before closing at 3349.97.

Larsen & Toubro, Crompton Greaves, SKF India, Nelco, Astra Mirco, Graphite India, Gammon India and Alstom Projects gained in the range of 2 per cent to 8 per cent.

Nelco was the largest gainer, up by 8.12 per cent to Rs 47.25 as against the previous day’s close of Rs 43.70.

Crompton Greaves gained by 4.31 per cent to Rs 373.05 as against the previous day’s close of Rs 357.65. Astra Micro rose by 4.63 per cent to Rs 890 (Rs 850.60), Gammon India by 3.2 per cent to Rs 883.20 (Rs 856.25), Graphite India by 2.86 per cent to Rs 170.85 (Rs 166.10) and Alstom Projects by 2.6 per cent to Rs 170.05 (Rs 165.80).

Most of these stocks are currently trading at their all-time highs, primarily due to growth prospects and orders on hand.

Larsen & Toubro, India’s leading engineering and construction company, had on Wednesday announced that it had won an order for the supply of a tubular reactor system valued at Rs 130 crore from Kuwait Olefins Company KSC Kuwait, a joint venture between Dow Chemical Company ,US and PIC, Kuwait.

The company also bagged a $14.10 million Qatar power project contract from Siemens, Germany last month. The stock closed at all time high of Rs 1,081.85, up by 2.22 per cent on the BSE.

Sector shares which hit their lifetime highs in the last two days on the BSE include Gammon India (Rs 900), Madhucon Projects (Rs 607), Alstom Projects (Rs 174.45), Crompton Greaves (Rs 401), Larsen & Toubro (Rs 1,102.65), Graphite India (Rs 182), Igarshi Motors (Rs 166), Jindal Drilling (Rs 159.70) and Selan Exploration (Rs 41.85).

In the last one month the capial goods index has appreciated 21 per cent compared with an 8 per cent rise in the Sensex.

The share price of Mahindra Gesco Developers, High Energy Batteries, Subhash Projects, Jindal Drilling, Avery India, Texmaco, Kalpataru Power Transmissions and Patel Engineering have appreciated by more than 50 per cent in the last one month.

In fact, shares from capital goods sector appreciated by more than 100 per cent in the last one year as a lot of resources are to be committed towards generation and distribution of power and building general infrastructure in the coming few years.

During the quarter ended December 2004, the capital goods sector posted a 53 per cent growth in bottomline. The aggregate net profit of 182 capital goods companies increased to Rs 2,935 crore from Rs 1,920 crore in previous year quarter.

The government is considering a proposal to reduce the customs duty on capital goods imported for setting up captive power plants. It has been proposed that the duty be slashed from the current 20 per cent to 5 per cent to bring it on a par with other power plants.