BSE Capital Goods index hits all-time high; L&T surges 15% in 2 days

The capital goods index hit a record high of 21,345 in intra-day trade, surpassing its previous high of 21,021, touched in November 2007

Shares of capital goods companies were on a roll on Tuesday, with the S&P BSE Capital Goods index surging 4 per cent in intra-day deals to hit an all-time high after the government's strong capital expenditure (capex) push in the Budget 2021.

At 09:21 am, the S&P BSE Capital Goods index, the second largest gainer among sectoral indices, was up 3.9 per cent, as compared to 2.8 per cent rise in the S&P BSE Sensex. The index hit a record high of 21,345 in intra-day trade, surpassing its previous high of 21,021, touched in November 2007.

Larsen & Toubro (L&T), Havells India, Bharat Heavy Electricals (BHEL), Kalpataru Power Transmission, Thermax, Finolex Cables, ABB and Siemens from the capital goods index were up in the range of 3 per cent to 5 per cent.

As expected, the government has stepped up its capex at Rs 5.54 trillion (up 26 per cent) in the Budget to ramp-up infrastructure spending with focus on economic revival. Further, Rs 2 trillion towards additional capex to nudge states, allocation of Rs 20,000 crore toward setting up a development financial institution (DFI) to have lending portfolio of Rs 5 trillion over the next three year with the aim to mobilise funding required fulfilling National Infrastructure Plan (NIP).

All these announcements aim to boost infrastructure spending having a multiplier effect and likely create robust tendering opportunities in key sectors like road, railways, defence, power T&D, water, urban transportation, infrastructure, etc, and likely to benefit companies like L&T, KEC, Kalpataru, etc, ICICI Securities said in a note.

Analysts at UBS believe equity markets should generally look at this budget in a favourable way. The higher capex allocations could improve visibility for industrials sector, the foreign brokerage firm said.

Among individual stocks, L&T hit a fresh 52-week high of Rs 1,540, up 6 per cent, thus rallying 15 per cent in the past two trading days. The stock of the construction & engineering major is trading close to its record high level of Rs 1,607, touched on May 28, 2019.