Capex plans an early sign of capital goods sector's return to normality

The strong stock price momentum is now backed by improving fundamentals

One of the key indicators of corporate investment is a pick-up in the capital goods sector. Capital goods gain when there is capacity expansion, which is usually a signal of better demand. The capital goods segment has an encouraging performance in the Q2, 2021-22 and more broadly in the H1, 2021-22. While the two-year CAGR for the sector is still negative, there are signs that it is reverting to normality.

A study by Motilal Oswal Securities of eight large capital goods companies shows year-on-year (YoY) revenue growth aggregated to 15 per cent over Q2, 2020-21 and it was flat when