The capital goods index was buoyed on Tuesday, closing 4.40 per cent up on the Bombay Stock Exchange (BSE), on the back of the HSBC Purchasing Managers' Index (PMI) indicating an improvement in the manufacturing sector's performance in December and the overall positive sentiment in the market.
Market players, however, are sceptical about the sustainability of this surge in the capital goods stocks.
“The HSBC PMI rose to 54 points in December. Anything above 50 points is positive news. So, this bit of positive news brought relief to the capital goods sector,” said Ms Nidhi Agrawal, Research Analyst, Sharekhan. However, she underscored that this data was in sharp contrast to IIP numbers.
Many stocks in the capital goods category closed nearly five per cent up. Month-ago comparison figures on the BSE show that the capital goods index was 14.55 per cent down. Last month many stocks in this sector touched their 52 week lows.
Larsen and Toubro Ltd, which has 52.80 per cent weight in the BSE-CG index, closed at Rs 1,059.55, up 5.04 per cent from its previous close. The stock had touched a 52 week low on December 21 at Rs 971.
Another stock that closed in the green on Tuesday was that of Bharat Heavy Electricals Ltd. The stock closed at Rs 247.95, up 4.86 per cent from the previous close. Last month, the stock touched a 52-week low at Rs 225.
“The capital goods sector stocks have moved up owing to the general market mood today. It is doubtful if this rally will continue for these stocks because the macro concerns of low project activity and high interest rates remain,” said Mr Sanjeev Zarbade, VP Research, Kotak Securities.
However, an Emkay Global research report said, “We believe that risk to FY-12E earnings is negligible since execution, if any, from orders secured in H1-FY-12 only have been factored in.”
Siemens Ltd, which holds 5.13 per cent weight in the BSE-CG index, closed at Rs 669.80, up 4.83 per cent from the previous close on the BSE. This scrip also touched a 52-week low last month.
Some other stocks in the capital goods category which closed in the green are of Crompton Greaves Ltd which closed at Rs 125.75, up 1 per cent; Bharat Electronics which closed at Rs 1397.25, up 3.13 per cent; and ABB Ltd which closed at Rs 592, up 1.92 per cent from the previous close on the BSE.
The BSE Sensex closed 2.72 per cent higher than its previous close.