Investors prefer smallcaps, midcaps

Mon, 8 Mar 01:30 pm

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   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

The Indian markets continued to trade well above the dotted line during the previous two hours of trade. Buying activity continued to remain firm with an interest being seen in stocks across sectors. Stocks from the auto, banking, healthcare and capital goods spaces are leading the pack of gainers, while those from the power and oil & gas spaces are amongst the lowest gainers.

The BSE-Sensex and the NSE-Nifty are currently trading higher by around 180 points (up 1.1%) and 55 points (up 1%) respectively. Stocks from the midcap and small cap spaces are trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 1.1% and 1.5% respectively. The rupee is trading at 45.42 to the US dollar.

Auto stocks are currently trading firm led by Mahindra & Mahindra (M&M), TVS Motor, Hero Honda and Tata Motors. It is believed that auto major, M&M is in discussions with various European two-wheelers manufacturers to develop premium bikes for the Indian market. Companies such as Triumph and Moto Guzzi are supposedly some of the companies with whom M&M is in discussions with. While there is not official statement from the company, this would definitely be a very different segment for the company, considering that it has just recently entered the two-wheeler segment. M&M had recently moved into the two-wheeler space by acquiring Pune based Kinetic and has currently selected offerings in the in the mid-segment of the motorcycle market.

A handful of two-wheeler manufacturers have tied up with international brands to launch the latters’ products in India. These would be however, mainly aimed at the high end segment, where the market is fast growing and does not have a lot of players present at the moment.

Auto ancillary stocks are currently trading firm led by Bharat Forge, Exide Industries and SKF India. A few months ago, auto component manufacturers would have not expected the auto manufacturers (OEMs) to record robust sales volumes that are being witnessed at present. As such, the auto ancillary companies did not go about expanding capacities. However, a leading business daily has reported that in addition to the tyre shortage that the industry is seeing at present (as tyre manufacturers are diverting a large section of volumes to the replacement market), the OEMs are also seeing a shortage in supplies of many other automobile components. These components include alloy wheels, various engine components, electronic feed and machined components. As per industry experts, it is believed that it would take about six months for the components sector to be able to bridge these supply gaps.

Apart from a pickup in capacities, auto component manufacturers are also looking at price rises on the back of an improved demand scenario in addition to the overall increase in input costs. At the same time, the auto components manufacturers also need to deal with cheap imports from other Asian nations. While the government has imposed a high antidumping duty on tyre imports, the same has not been done for the other components. Auto ancillary majors, however, are believed to have committed huge amounts of investments towards ramping up capacities.