Smallcaps outperform their peers

Tue, 18 May 01:30 pm

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Buying activity led the Indian indices to shed their morning session losses and rise well above the dotted line during the previous two hours of trade. The overall advance to decline ratio is poised at 2.3 to 1 on the BSE. Currently stocks from the consumer durables, capital goods and oil & gas spaces are amongst the top gainers. Stocks from the metal and realty spaces are however seeing some pressure at the moment.

BSE-Sensex is trading higher by 120 points (up 0.7%), while the NSE-Nifty is trading higher by about 30 points (up 0.6%). Stocks from the midcap and smallcap spaces are however garnering more interest as the BSE-Midcap index and BSE-Smallcap indices are trading higher by 0.9% and 1.5% respectively. The rupee is trading at 45.54 to the US dollar.

Power stocks are currently trading firm led by Torrent Power, Reliance Power and CESC. Power major, NTPC announced its results for the quarter and full year ending March 2010 recently. For the full year, the company reported a sales growth of 9% YoY. The company reported operating margins of 29.7%, higher by 1.2% YoY as compared to FY09. Margin expansion was mainly on account of lower fuel and staff costs (both as percentage of sales). The company's net profits rose by 6% YoY. As compared to operating profit growth of 14% YoY, the net profit growth has slowed down on account of lower other income and higher tax outgo. The other income is lower on account of lesser interest income. As for the quarterly numbers, revenues and operating profits are higher by 5% YoY and 3% YoY respectively. Net profits, on the other hand, are down by 5% YoY as compared to the corresponding quarter last year.

In other news, a leading business daily has reported that the company plans to float a US$ 4.2 bn (approximately Rs 190 bn) tender for the supply of super critical equipment manufactured in India. The tender will be for around 8 units of 800 MW (megawatts) each.

Stocks of battery manufacturers are trading firm led by Amara Raja and Exide Industries. As per a leading news agency, India's largest automobile battery maker Exide Industries is planning to invest nearly Rs 4 bn for expanding its capacity. This expansion would be mainly aimed towards building up its two-wheeler battery capacities. It is reported that the installed capacity would increase by 60% from current levels. This plan would be in anticipation of strong demand, especially after considering the strong volumes sales of two-wheelers during the past year. This growth in two-wheeler volumes had been rural driven. With the economy expecting to clock 8.5% GDP growth this fiscal, demand for two wheelers is expected to remain strong. Furthermore, Exide plans to improve its sales to original equipment manufacturers from 70% to 90% in order to improve relationship with the companies. It may be noted that demand for automobiles has helped Exide improve its bottom line by 88% YoY in FY10.