Smallcaps outpace their larger peers

Thu, 1 Apr 01:30 pm

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The Indian markets continued to gain further ground on account of selected buying amongst heavyweights during the previous two hours of trade. Stocks from the IT, consumer durables, realty and capital goods spaces are leading the pack of gainers, while those from the auto and FMCG sectors are in the red. Stocks from the banking and healthcare spaces are amongst the lowest gainers at present.

BSE-Sensex is trading higher by about 110 (up 0.6%) points while NSE-Nifty is trading higher by about 30 points (up 0.6%). BSE-Midcap Index is up by 0.8% while the BSE-Smallcap index is trading higher by 2.1%. The rupee is trading at 44.92 to the US dollar.

The largecap auto stocks are currently trading weak led by M&M, Maruti Suzuki and Bajaj Auto. Passenger car major Maruti Suzuki announced its volumes sales numbers for the month of March and full year. During the month, the company sold 95,123 vehicles, as compared to about 85,669 units during the same month last year. This translates into 11% YoY growth in volumes during the month. While domestic sales volumes increased by about 7.7% YoY, exports grew at a faster pace of 32% YoY. The latter contributed to about 16% of total sales as compared to about 14% during March 2009. Domestic sales slowed down this month, mainly due to the slowdown in volumes of its A2 segment (which includes models such as Alto, WagonR, Estilo, Swift, AStar and Ritz), which saw volumes drop by about 1% YoY.

It must be noted that this segment contributed to about 58% of total volumes during the month of March 2010 (65% last year). As for the full year, the sales volume growth stood at 29% YoY. Domestic sales grew by about 21% YoY, while exports grew by about 111% YoY. It must be noted that exports formed about 9% of sales volumes during FY09. During FY10, exports formed about 14.5% of total sales volumes.

Stocks of tyre manufacturers are trading firm led by Apollo Tyres and Ceat. The stock of Apollo Tyres is trading higher on accent of it hiking prices of its products. A leading business daily has reported that the company has increased prices by about 2% to 4% across categories. These price hikes are mainly towards offsetting the rise in rubber prices. It may be noted that rubber forms nearly 40% of total cost of a tyre. It is further reported that the management is mulling over another round of price hikes to control the impact of higher costs.

Considering that there is an overall shortage of tyres in the auto sector, coupled with the fact that the government has imposed a higher duty on tyre imports, volumes of the tyre manufacturers are not likely to get affected with such price hikes. As it is, they are able to pass on costs to the car manufacturers.