Stocks of major capital goods companies have delivered a stellar performance in 2022.

Driven by a revival in capex cycle and strong order inflows, BSE Capital Goods index has gained 15.61 per cent this year and has beaten the equity benchmark S&P BSE Sensex by a wide margin of nearly 12 per cent.

BSE Capital Goods index contains a universe of 24 stocks with a trailing twelve-month P/E of 32.43 times. These companies cater to the requirements of power, industrial, defence and urban infrastructure companies among others. As on November 30, 2022, top 10 companies constituted about 79 per cent of this index.

Top performers

The top five capital goods stocks have delivered returns in the 42-104 per cent range on a year-to-date (YTD) basis.

Aerospace and defence company Hindustan Aeronautics Ltd (HAL) is leading the pack and trading on a P/E (TTM) of 18.72 times. The stock was powered by a strong order backlog, increasing export opportunities, rising indigenisation and government’s increased focus on domestic manufacturing amid rising geopolitical tensions.

Next to HAL, bearings manufacturers Timken India and Schaeffler India have gained 58 per cent each while they are trading at P/E of 57.7 times and 51.93 times, respectively.

During H1 FY23, Timken and Schaeffler posted revenue growths of 36 per cent and 30 per cent, respectively, while they maintained net profit margins in the range of 13-16 per cent. Pick up in automotive segments, expanding themselves into new territories of bearings, capex plans and relocation strategies for export growth might have supported the stocks.

The stock of air compressors manufacturer Elgi Equipments, trading at a P/E of 58.7 times, has shot up 47 per cent in 2022. The company posted a revenue growth of 25 per cent in H1 FY23 with net margins expanding to around 9 per cent from around 5.5 per cent y-o-y. According to the company’s management, the growth was driven by price hikes.

Similarly, the stock of aerospace and defence electronics company Bharat Electronics has gained 42 per cent during the year backed by 35 per cent growth in revenue, better execution, an order pipeline to the tune of ₹52,800 crore and order inflow guidance of ₹20,000 crore. The public sector major is currently trading at P/E of 26.7 times.


While majority of the stocks in the BSE Capital Goods index have remained in green during the year, five stocks have delivered negative returns to the investors.

Earlier touted as one of the best plays on EV theme, the stock of auto components manufacturer Sona BLW Precision Forgings has lost 43.49 per cent this year, making it the worst performer in the capital goods space. Prior unsustainable valuations, input cost pressures leading to margin contraction, reduction of stake by Blackstone and the company’s exposure to US and Europe markets, which were hit by global uncertainties, have led to a correction in the stock.

Similarly, the stocks of abrasives manufacturing companies Carborundum Universal and Grindwell Norton have delivered negative returns to the tune of -11 per cent and -7 per cent respectively, while they are trading at P/E of 50.69 and 67.15 times, respectively.

Carborundum Universal has seen margin contraction in the last three quarters on account of poor performance by recently acquired companies and rising cost pressures. Margin pressure on account of rising input costs has also been a concern for Grindwell Norton.

Infrastructure company GMR Airports Infrastructure saw its share price declining by around 5.66 per cent during the year.

Industrial automation solution provider Honeywell Automation’s stock is likely to end the year on a flat note. On a y-o-y basis, the firm’s revenue growth in Q2 FY23 has been lower than estimates on account of supply chain constraints..

Overall, the sector has performed well during the year supported by investments, increase in capacity utilisation levels and government’s push. It will be interesting to see how the theme plays out in the next year amid expectations of a global slowdown with India remaining resilient.