Small caps buck the trend

Wed, 13 Jan 11:30 am

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The Indian stock markets made several attempts to rise above the dotted line during the previous two hours of trade but to no avail. The indices, however, managed to pare some of the early losses on account of buying activity witnessed in the stocks from IT, telecom and healthcare sectors. However, currently stocks from the banking, realty and capital goods sectors are weighing heavily on the indices.

The BSE Sensex and the NSE Nifty are trading in the red, down by 50 points and 25 points respectively. The BSE-Midcap is trading down by 0.3%. However, small cap stocks have managed to buck the trend. The BSE-Smallcap is trading up by 0.2%. The rupee is trading at 45.68 to the dollar.

As per a leading business daily, Indian FMCG major ITC is planning to revamp its incense sticks (agarbatti) business. For this, it has signed an MoU with Infrastructure Leasing and Financial Services (IL&FS) to implement Tripura government's incense sticks project. Under this project the government aims to develop clusters for manufacturing incense sticks state-wide. ITC will be responsible for marketing these incense sticks under its flagship brand 'Mangaldeep' or one of its variants. The company has also signed another deal with Cane and Bamboo Technology Centre in Guwahati for a similar venture in other north-eastern regions. The highly diversified company entered this Rs 18 bn business in 2004. It marketed and distributed incense sticks under the ‘Mangaldeep’ brand which ranks second in the market, just after the Cycle brand. With the latest initiatives the company aims to ramp up its incense capacity by at least 50% in the next couple of years.

According to a leading business daily, state-run IDBI Bank is looking to merge with a private sector bank for which it has completed the due diligence. While the time-frame of the merger is yet to be decided, the bank hinted that the merger will take place in the short term. It may be noted that IDBI Bank, though one of the smaller public sector banks, is not a candidate for merger under the government's public sector banks consolidation scheme. At the time of conversion of IDBI into a bank, it was assured that the new entity (IDBI Bank) would not be merged with another bank. Moreover, the government has recently hinted that it will favour synergy-based consolidation in the public sector.

The merger target for IDBI Bank is yet to be disclosed. However, a good consolidation will aid the bank in gaining scale which it might need to compete with other private and public sector banks. It is worth noting that IDBI Bank acquired United Western Bank in 2006, but some human resource related problems are yet to be resolved. Hopefully, the bank should be better prepared for such things this time. Meanwhile, the bank sees some pick up in credit growth and expects to meet its credit growth target of 20% for the current fiscal. IDBI Bank is trading in the red along with other peers in the banking space.