Smallcaps in favour today

Mon, 21 May 01:30 pm

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The Indian stock markets continued to trade well above the dotted line during the previous two hours of trade. Buying interest is being witnessed in stocks from the realty, engineering and banking spaces at the moment, while stocks forming part of the technology and FMCG spaces are amongst the top underperformers.

The BSE-Sensex is trading higher by about 120 points (0.7%), while the NSE-Nifty is up by about 33 points or 0.7%. However, it seems that stocks from the smallcap spaces are finding maximum interest today as the BSE Small cap Index is trading higher by 1%. The BSE Mid cap Index is up by about 0.7% The Rupee is trading at Rs 54.62 to the US dollar.

Mining companies are in demand today with Ashapura Minechem, Minerals and Metals Trading Corporation (MMTC) and Sesa Goa trading firm. Coal India (CIL) announced its standalone results for the quarter and year ended March 2012 recently. During the quarter, the company's production and off-take levels decreased by 35% and 26% respectively. However, despite the same happening, CIL's revenues declined by 2% YoY. The company performed well at the operating level as expenses decreased by a sharp 23% YoY, leading to a 529% spike in operating profits (Rs 382 m). EBIDTA (Earnings before Interest, Depreciation & Amortization and Tax) margins for the quarter stood at 24.7% as against 3.9% during 4QFY11. However, considering that the quantum of the operating profits is miniscule as compared to the other income (Rs 15.4 bn), the company's profit before tax only grew by 17% YoY. This is because of a relatively slower increase in other income coupled with higher interest costs. CIL's profits declined by 12% YoY due to tax outgo as compared to a negative tax figure during the corresponding quarter last year.

For the full year ended FY12, CIL's net sales increased by 1.6% YoY while standalone net profits rose by 72% YoY. The increase in the net profit was mainly due to higher other income - dividends paid by subsidiary companies and interest income.

Stocks of steel companies are trading weak with Tata Steel, Steel Authority of India (SAIL) and Jindal Steel trading in the red. Tata Steel has announced its March quarter (4QFY12) results. On a consolidated basis the company has reported a 0.5% YoY growth in topline and 89.6% YoY decline in net profits. Consolidated operating profit and operating margin declined by 30.1% YoY and 4.1% YoY respectively on account of higher raw material cost weak steel demand in Europe. On a standalone basis, the company reported an increase of 13.6% YoY in sales and a decline of 8.6% YoY in net profits. For the full year ended March 2012, consolidated net sales increased by 12.9% YoY while net profit declined by 40% YoY. On a standalone basis, net sales increased by 16% YoY and net profits declined by 2% YoY.

The company has recommended a dividend of Rs 12 per share for the full year. The Group's steel deliveries fell marginally by 1.1% to 24.2 m tonnes in FY12 as compared to 24.5 m tonnes in FY11. 4QFY12 steel deliveries fell by 6.5% to 6.2 m tonnes as compared to 6.6 m tonnes in 4QFY11.