Capital goods sector bounces back

By SiliconIndia   |   Thursday, October 29, 2009
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Bangalore: After continued low or negative growth since October 2008, there are indications of industrial recovery, which has helped the capital goods sector to perform well. Robust index of industrial production (IIP) figures in June-August and double digit growth of 10.4 percent for August 2009 compared with August 2008 are good signs, say experts. However, there is also a view that double digit growth may be a result of the low base effect. In the markets, capital goods stocks outperformed the broader markets this year on the back of various policy measures announced by the government to bolster infrastructure activities, reports Financial Chronicle. According to Yashika Singh, Head of Economic Analysis at Dun and Bradstreet (D&B), IIP numbers for the capital goods sector have shown some improvement during the past three months as growth in the segment averaged 7.8 percent during June-August 2009 after a decline of 5.3 percent during March-May 2009. "This can largely be attributed to the recent rise in infrastructure spending and resumption in investment activity of the corporate sector," says Yashika. Capital investment also registered a healthy compounded annual growth rate of about 10 percent during 1997 to 2007. However, of late, growth has slowed down. The sector posted seven percent growth in 2008-09 (April-October) against 18 percent in 2007-08. At present, India's capital goods industry is facing a surge in imports from China, which rose from Rs. 5,120 crore in 2002-03 to Rs. 54,200 crore in 2007-08. China's share in India's total import of capital goods is up from 38 percent in 2002-03 to 50 percent in 2007-08. The benchmark Bombay Stock Exchange (BSE) capital goods index zoomed 106.42 percent year-to-date against a 79.59 percent rise in the BSE Sensex. Scrips of Kalpataru power, Thermax, BEML, and Gammon India skyrocketed 264.27 percent, 225.15 percent, 223.75 percent and 206.36 percent, respectively. While, Reliance Infrastructure, Crompton Greaves, Usha Martin and Siemens advanced 181.80 percent, 173 percent, 168.47 percent and 106.20 percent, respectively, Punj Lloyd, BHEL, ABB and Suzlon also returned 97.01 percent, 83.55 percent, 78.39 percent and 43.58 percent respectively.
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