BSE Capital Goods index hits 52-week low

About 24% lost in one month, 14 stocks on losing list.


Our Bureau

Mumbai, Oct. 7 Capital goods stocks, which had not been faring as badly as stocks in other sectors in this year's market decline, have been falling for over a month now.

The BSE Capital Goods index in the past week fell close to 14 per cent, and in the past one month it fell almost 24 per cent. On Tuesday, the index fell four per cent, to its 52-week low, making it the worst performing among the sectoral indices.

It may be mentioned that the other indices, including the Sensex, reached their 52-week lows on Tuesday.


"After being pampered with high valuations for such a long time, the prices of the capital goods stocks are finally seeing a fall. In such market conditions there is no reason why this index should enjoy such high premiums to the Sensex. With high interest rates and increasing costs, these companies are likely to face margin pressures and the premiums are starting to slowly vanish," said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets.

"While lower and stable raw material prices would benefit the companies in the capital goods sector, worries on the demand side seem to have increased keeping in mind the high inflation, high interest cost and a possible drop in the pace of infrastructure spend," said Prabhudas Lilladher in July-September 2008 Earnings preview report.

Profit Booking

Also, after enjoying such high valuations, this sector is now seeing quite a bit of profit booking, said the head of research at a brokerage.

The falling Index of Industrial Production is also another reason why this sector is seeing a lot of selling now, said market men.

A total of 14 stocks declined in the capital goods index and only one advanced during the day. BHEL was the only stock that ended the day in the black.

Losers

Of the 15 stock in the index, 12 recorded their new 52-week lows on Tuesday. These included ABB (which fell 5.66 per cent), Bharat Bijlee (7.13 per cent), Gammon India (1.9 per cent), Havells (5.53 per cent), L&T (6.94 per cent), Reliance Industrial Infrastructure (4.37 per cent), Siemens (7.05 per cent) and Suzlon (1.97 per cent).

SKF, Walchandnagar Industries, Elecon Engineering Company, Praj Industries and Lakshmi Machine Works, too, hit new lows on Tuesday