Elecon Engineering to TD Power: Why capital goods stocks are skyrocketing
2 min read . Updated: 20 Jul 2022, 10:00 AM IST
Premium- BSE Capital Goods Index has given a 14.6 per cent return over the last month, whereas the Nifty Index has only given a 6.43 per cent return in this period
Stock market today: Shares of consumer durable segment in Indian stock market have delivered stellar return to its shareholders in last 3 months. In last three months, shares of Elecon Engineer have risen from around ₹190 to ₹334 apiece levels, Voltamp share price has risen from around ₹1850 to ₹3215 levels whereas Rolex Rings share price ha ascended from ₹1265 top ₹1743 apiece levels.
Speaking on the reason for rise in capital goods stocks, Avinash Gorakshkar, Head of Research at Profitmart Securities said, "Capital goods shares were at a discounted price as the sector had received heavy beating in last two years. But, now after the decrease in their raw material and better monsoon prediction, market is buzz on these stocks for last two to three months. However, rally in such stocks won't last for more than one to two quarters. So, my advice to shareholders of the consumer durable stocks is to book profit in short term."
Echoing with Avinash Gorakshkar's views, Sonam Srivastava, Founder at Wright Research said, "BSE Capital Goods Index has given a 14.6 per cent return over the last month, whereas the Nifty Index has only given a 6.43 per cent return. Capital goods sector is flourishing as the market recovers from the bottom, and the CAPEX cycle is reviving via the government push and private investment. As the commodity prices have started tanking, commodity consumers, cement, auto and capital goods sectors are getting stronger and have good prospects. Of course, given the geopolitical environment, one must be cautious with the cyclical capital goods sector and watch global cues."
Jason Soans, Senior Analyst at Ashika Group said, "Capital goods stocks have generated alpha returns owing to a broad-based recovery in industrial capex, favourable interest rates, China +1 strategy, strong initiatives of the GoI to support domestic manufacturing such as PLI and NIP( National Infrastructure Pipeline) and healthy demand for regular and specialised products. These aspects have been further corroborated by sanguine management commentary on demand from end markets as well as robust order inflows/order backlogs for the sector."
Jason Soans of Ashika Group recommended positional investors to buy ABB, Siemens, Cummins, Carborundum Universal, Grindwell Norton and GMM Pfaudler from the Capital Goods Space.
Asked about the capital goods stocks to buy today, Sonam Srivastava said, "We like Bharat Electronics Limited, Hindustan Aeronautics Limited, Larsen & Toubro Limited, and Bharat Forge as some top picks in this sector. Many of these companies also benefit from the PLI schemes and Atmanirbhar push."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
