Capital goods index at new peak

The index is up 3.99% at 7416.78, while Sensex gains 0.62% to close at 10169.12.

The capital goods (CG) index on the Bombay Stock Exchange hit an all time high at 7436.08 on Monday during intra-day trade. The index closed at 7416.78 up 3.99 per cent compared with the Sensex which gained 0.62 per cent to close at 10169.12.

Also, the BSE CG index has outperformed the Sensex by a significant margin during the current bull run. The BSE CG index has gained almost 133 per cent in the past year, while the Sensex gained 53.36 per cent.

The capital goods' stocks witnessed trading volumes of 44 lakh shares compared with last week's average of 41 lakh shares. The total traded value touched Rs 301.26 crore. Of the 28 scrips in the index, 17 showed positive movement.

Advanced stocks registered trade value of Rs 279.64 crore. The top gainers in the index were Kalpataru Power (10 per cent), Larsen & Toubro (8.02 per cent), Alstom Projects (7.19 per cent), Esab India (6.95 per cent) and Bharat Earth Movers (5.76 per cent).

Substantial volumes were observed in stocks of KEC International, Alstom Projects, Larsen & Toubro, Areva, Greaves Cotton and Aban Loyd Chiles.

"The prospect for the capital goods sector seems to be bright considering the heavy order bookings, infrastructure development projects, capex growth, easing raw material prices and macro outsourcing. Though, at present, the revenues have softened we still hold a positive view for this year," said Priyanko Panja, analyst, Edelweiss Securities.

The CG index P/E stands at 32.38 while the Sensex P/E is 18.67. Considering the current market levels, and the pace at which these stocks have run up, analysts feel that intermediate correction can't be ruled out.

While there is no doubt that the developments in the capital goods sector look promising, stocks seem to be running ahead of fundamentals.

But market players are a bit doubtful whether capital goods companies would be able to repeat their past year's performance in 2006.