Midcaps, small caps buck the trend

Wed, 6 Jan 11:30 am

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After witnessing a strong start today, the Indian stock markets remained somewhat choppy during the previous two hours of trade. The indices are currently trading below the dotted line on account of profit booking in the stocks from the IT, telecom, auto and metal sectors. However, stocks from banking, healthcare and consumer durables managed to garner investors' interest.

The BSE Sensex and NSE Nifty traded in the red, marginally down by 8 points and 5 points respectively. However, midcap and small cap stocks managed to buck the trend .The BSE-Midcap and BSE-Smallcap indices are trading up by 0.4% and 0.5% respectively. The rupee is trading at 46.15 to the dollar.

As per a leading business daily, BHEL, India's leading engineering PSU, has won orders worth Rs 300 bn so far in the current fiscal i.e. FY10. Out of these orders which sum up to erecting 11,700 MW of capacity, about 94% (11,200 MW) came from the independent power producers. The management has reported that the PSU is winning back private sector contracts that previously went to China. It is believed that equipment performance as well as competitiveness is aiding the PSU in strengthening its order book and wining huge private sector orders. It may be noted that until recently the public sector was the major spender on power capacity additions for whom BHEL was the invariable supplier. However, with the emergence of more private players the situation changed. Private players used to prefer Chinese equipments due to their timely delivery and lesser cost. Nevertheless, there is a shift in their behaviour now. We believe, with better performance and reasonable pricing, BHEL can continue to keep competition at bay.

According to a leading business daily, Bharti Airtel has got an approval from Bangladesh's telecom authority for its proposed acquisition of 70% stake in Warid Telecom. Airtel plans to invest US$ 300 m in Abu Dhabi Group's Warid which is the fourth largest mobile company in Bangladesh. According to the approval grant, Warid has been asked to submit a schedule of Bharti's initial investment within 30 days. The initial sum of US$ 300 m is supposed to be used in network expansion. It may be noted that Warid which started operations in Bangladesh in 2007 had a subscriber base of 2.92 m at the end of November 2009. Bangladesh brings in a lot of opportunity for the telecom sector which is growing rapidly there on the back of low penetration levels, competitive tariffs and steady economic growth. As per projections, overall subscriber base in Bangladesh is expected to reach 70 m by 2011 from the current level of 51 m. It is expected to reach 100 m by 2015. We believe that this acquisition offers Bharti a good opportunity to expand abroad in times when the Indian market is plagued by rigorous price wars triggered by rampant entry of new players. Bharti is trading in the negative.