Capital goods index hits a high

The Bombay Stock Exchange's Capital Goods Index, whose constituents include Larsen & Toubro, ABB and Siemens, touched an all-time high on Monday.

Thought the rally in shares of companies within the capital goods sector is sustainable, valuations are stretched and the sector could witness a small correction in the short run, say analysts.

BSE Capital Goods Index touched an all-time high during mid-session on Monday at 12,954.34, before closing at 12,901.82, up 0.98 per cent or 125.14 points from Friday. Kalpataru Power Transmission, Lakshmi Machine Works, Thermax Ltd and Larsen and Toubro lead the capital goods pack with gains of 2 to 4 per cent.

The capital goods sector has outperformed the benchmark Sensex, which grew by nearly 41 per cent from July 10, 2006 till on Monday.

The BSE Capital Goods Index rose by 86 per cent in the same period from 6932.72 points on July 10 in 2006, rising by 86 per cent in the same period.

"Valuations are high within this sector. The rally is sustainable in the coming months but not at the same growth rate," said Mukul Jain, research analyst, Prabhudas Lilladher.