Mid & small caps buck the trend

Wed, 14 May Closing

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After harboring into negative territory during the post noon trading session, the Indian stock markets ended the day on a weak note. The BSE-Sensex closed lower by about 56 points or 0.2%. The NSE-Nifty closed the day on a flat note. Stocks from the capital goods, auto and oil and gas spaces were the biggest losers. However, gains were seen across realty and metal stocks. The BSE Mid Cap and BSE Small Cap indices bucked the trend and ended the day on a positive note, with both the indices closing higher by about 1.1% and 1.2% respectively.

Stock markets in other parts of Asia ended the day on a positive note. The rupee was trading at Rs 59.6 to the dollar at the time of writing.

Engineering stocks closed the day on a mixed note. BGR Energy and Jyothy Structure were the leading gainers. However, Alstom T&D and ABB India Ltd ended the day in the red. The cabinet committee on economic affairs (CCEA) has ratified a decision to sell 5% stake in power equipment maker BHEL. It may be noted that in March the government had divested about 5% in the company to LIC. Following the stake sale in March the government's stake came down to 63%. If the current stake decision also fructifies, government stake would further go down to 58%. A gradual divestment in the PSU will not only help the government fund its fiscal deficit but it shall also increase institutional/individual shareholding and thus increase the float. On this development the stock has rallied quite a bit in the last 2-3 days.

With the new government expected to assume power at the centre, most engineering and infrastructure stocks have rallied in the recent months. However, is it right time to buy them? Share your views on the Equitymaster Club.

Majority of PSU mining stocks have closed the day on a firm note. Leading the pack of gainers were Coal India and National Hydroelectric Power Corp. (NHPC Ltd). As per the financial daily, two major PSUs viz Nalco and Steel authority of India (SAIL) have to agreed to go for an out-of-court settlement on outstanding electricity and water dues with the Odisha government. This step was taken after the issue was raised in the meeting attended by Union steel secretary A K Pujari and various other heads. It was decided to form a committee to resolve the issues. The outstanding electricity dues of Nalco are approx. Rs 10 bn, and pending water dues of Rs 3 bn. The outstanding electricity dues for SAIL's Rourkela plant are Rs 612 m. Both the PSUs had gone to the court contesting the claim. The authorities will be working towards amicable settlement of dispute with both the PSUs. Thus after some agreement with both the PSUs, it will be decided as to how much and in what time frame both will pay towards the outstanding. The mandate by the committee is expected in next two months.