Capital goods stocks could surge on order visibility, pick-up in exports

Near-term trigger is the strong Q4 results led by revenue growth and expanding margins

A huge jump in order inflows has led to a fair amount of investment into the capital goods sector. Indeed, the BSE Capital Goods Index has risen by 5.5 per cent this year comfortably outperforming the Sensex and Nifty. The rise in orders is largely driven by policy initiatives from the government. There is the budgetary thrust on infrastructure and mining. The other is the emphasis on defence indigenisation coupled to the interest in the related aerospace and space sectors. In addition, there is some pickup in export orders for EPC companies like L&T and KEC Int.

The FPIs have