Midcaps and smallcaps buck the trend

Tue, 19 Jan 01:30 pm

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After witnessing a weak start, the Indian stock markets remained muted during the previous two hours of trade. Despite several attempts to touch the breakeven line, the markets have not yet managed to break into the green. Currently, stocks from the IT, telecom, healthcare and auto sectors are trading weak, while stocks from the consumer durables, banking and metal sectors are finding favour.

The BSE Sensex and NSE Nifty are trading in the red, marginally down by 12 points and 4 points respectively. However, midcap and small cap stocks have managed to buck the trend. The BSE-Midcap and BSE-Smallcap are trading up by 0.5% and 0.8% respectively. The rupee is trading at 45.58 to the dollar.

According to Fitch, the global rating firm, the Indian auto sector is expected to grow by 10-12% in revenues in 2010 on the back of decent domestic and overseas demand. However, the credit rating agency in its 'Indian Auto Sector Outlook' indicated that Indian automakers will witness pressure on margins on account of high competition in the sector. With the increasing penetration of global original equipment manufacturers (OEMs) and a plethora of new players entering the lucrative Indian small car segment, the competition is bound to intensify.

It may be noted that many global OEMs are setting up shops in India, either independently or as joint ventures with the existing players in order to leverage their established distribution networks. The segment leaders like Maruti Suzuki, Tata Motors and Hyundai Motor India are expected to find a tough time guarding their market shares. Apart from increase in competition, this inundation of automakers and OEMs is expected to result in under-utilisation of capacity in the medium term on back of mismatch in demand and supply.

HT Media declared its 3QFY10 results yesterday. The company increased its topline by 5.9% during 3QFY10 on the back of higher circulation revenues. The operating profit margins increased from 6.3% to a whopping 20.3% on account of better pricing, lower newsprint costs and cost rationalisation. This, despite the higher tax outgo and lower other income, made the bottomline turn positive during the quarter. The net profit margin stood at a decent 9.6% at the end of 3QFY10. During 9mFY10, topline increased by 3.6% YoY while bottomline turned positive. It may be noted that the company has invested around Rs 1.5 bn in its Mumbai press inorder to increase its presence in the Mumbai markets. It has capex plans of Rs 1.25 bn for the fiscal, out of which about Rs 400 m will go towards the Burda joint venture. The company expects to break even on the radio segment by the end of FY10, while EBITDA level losses in the internet business are expected to be around Rs 480 m.