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Mid and small caps in the limelight
Wed, 19 Jan 11:30 am

Indian indices continued to trade range bound with a positive bias over the previous two hours of trade. Stocks from the metal and consumer durable space are trading firm, while stocks from the capital goods and IT space are trading weak.

The BSE-Sensex is up by 27 points, while Nse-Nifty is trading 9 points above the dotted line. BSE Midcap and BSE Small cap indices are both up by 0.7%. The rupee is trading at 45.35 to the US dollar.

Consumer goods stocks are trading firm led by Marico and United Breweries. As per a leading financial daily, Hindustan Unilever Ltd (HUL) has overtaken Nestlé India in volume terms in the branded instant coffee sector in India. As per AC Nielson, for the September quarter, HUL had a market share of 51.1% (47.9% in the June quarter) while Nestlé had a market share of 48% (51.9% in June quarter). The Rs 20 bn coffee market in India is seeing a lot of action. While Nestlé is adding star power to its current advertisement campaign, HUL has put in place an integrated plan which includes power-packed television campaigns, rural activation programmes and micro marketing initiatives. The market share of coffee varies from quarter to quarter as does the seasonal consumption. It is for this reason that the neck-to-neck competition between the two players will continue.

Oil & gas stocks are trading firm led by Petronet LNG and HPCL. However, GAIL and Cairn India are trading weak. In a bid to expand its existing pipeline network India's largest gas transportation firm, GAIL plans to incur an investment of Rs 70 bn in FY12. In order to meet the funding requirement for the capex the company plans to raise Rs 35 bn from the market, while the balance amount will be met through internal accruals. It may be noted that the company plans to add 1,500 km of pipelines by next year which will increase its gas transmission capacity to 230 mmscmd from current 180 mmscmd. In order to expand the network the company is not averse to raising money via debt either and has lined up a few ECBs and FCCBs so as to get an access to cheaper borrowings. Lastly, GAIL has an aggressive target to invest over Rs 350 bn in the next four years to expand its pipeline networks. Thus, the company will have to raise huge amount of external capital as well as debt in order to meet the funding requirement.

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