Trend

Sunny days are here again

With order books of capital goods companies rising, investors believe earnings, too, will improve, due to benign interest rates

With investors staying away due to low demand, leveraged balance sheets and policy issues in user industries such as power, the capital goods sector has been a severe underperformer. So much so that its weight in the Sensex dropped to 4.8%, the lowest in a decade. Moreover, the sector is currently trading at 2.5x (price to book value), which is a 42% discount to its 10-year average of 4.3%.

However, the pall of gloom is likely to lift, with L&T igniting hopes of a revival. During its March quarter result, L&T guided for a 15% growth in order intake this fiscal, a 50 basis points improvement in margin and 12-15% growth in revenues. Post the announcement, the BSE Capital Goods index has gained 15%, outpacing the Sensex&rs

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