Capital goods stocks rally despite weak IIP numbers

Capital goods stocks, led by engineering giant Larsen & Toubro, jumped by up to 6.93 per cent on BSE on buying at prevailing attractive levels despite weak industrial production data.

The 19-share BSE capital goods index emerged as the best performer among the sectoral indices climbing by 665.01 points, or 5.26 per cent, to close at 13,301.26 points.

Helped by smart gains in capital goods stock, the BSE benchmark index shot up by 473.59 points, or 2.67 per cent - a record single session rise in over three months – to settle at 18,202.20 points.

Analysts said capital goods stocks received a booster and led the rally on the market after the Finance Minister said that the monthly IIP numbers do not reflect the correct picture of the economy. The industrial growth plunged to a dismal 1.6 per cent in December 2010.

Larsen & Toubro zoomed 6.70 per cent to Rs 1,660.75 after reports that the company has won a new order valued at Rs 1,100 crore from Gujarat State Electricity to set up a gas-based power plant.

Shares of state-run, BHEL gained 4.56 per cent to Rs 2,130, while Bharat Earth Movers Ltd ended 5.68 per cent higher at Rs 651.60.

Among other gainers, BGR Energy rallied by 6.57 per cent to Rs 523.60, Thermax by 6.28 per cent to Rs 640, Havells India by 6.93 per cent to Rs 323.20, Punj Lloyd by 3.24 per cent to Rs 73.35 and Gammon India by 5.82 per cent to Rs 116.30.

Analysts said that a marginal decline in inflation in January and covering-up of pending short positions by speculators helped the rally. Firming trend on the other Asian markets also boosted the sentiment.