Smallcaps in demand at the moment

Thu, 10 Jun 01:30 pm

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   09:30 am   

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The Indian markets continued to trade above the dotted line as they moved in a range bound manner during the previous two hours of trade. Barring select stocks from the realty space, buying activity is being seen across the board. Stocks from the auto, capital goods and power spaces are currently amongst the top gainers, while those from the IT and banking spaces are the lowest gainers.

The BSE-Sensex is trading higher by around 110 points (up 0.7%), while the NSE-Nifty is trading up by around 35 points (0.7%). The BSE-Midcap index is up by 0.4% and BSE-Smallcap index is up by about 1%. The rupee is trading at 47 to the US dollar.

Telecom stocks are currently trading firm led by Bharti Airtel, Idea Cellular and Reliance Communications. In an interview with a leading business daily, the Chairman and Managing Director of Bharti Airtel, Mr. Sunil Mittal expressed his views on high spectrum prices for both 3G and the ongoing BWA auctions. Similar to views of the overall sector, Mr. Mittal has termed the bidding 'completely unrealistic'. While the government may be content with the inflow of about Rs 1 trillion, which in turn will help in bringing down the fiscal deficit of the nation, Mr. Mittal believes that tariffs for 3G services cannot be as affordable as they are at present. This indirectly means that a good section of the population would not be in a position to opt for these services. If this would be the case, then it would really be interesting to see how various operators come out with their tariff plans. State-run BSNL's 3G services are priced similar to the existing 2G tariff plans.

In addition, Mr. Mittal also believes that the 3G auction process was faultily designed. This he says so because the process allowed players to keep entering and exiting the process at various stages, thereby leading to bid amounts to rise substantially as well as creating an artificial rise in prices. Since the top players needed to participate in the auctions, they indirectly became the victims of the same.

IT stocks are trading firm led by Tech Mahindra, TCS, Wipro and Infosys. As per a leading financial daily, HCL Technologies is planning to aggressively focus on the Brazilian market. Brazil is the largest domestic market in Latin America and accounts for over 50% of the IT spend in the region. HCL believes that as global economy improves companies in Brazil will face new growth opportunities and would make investments in IT. While HCL has already been present in Brazil for a year, to tap new opportunities, the company is looking to expand its infrastructure services. The company is also looking to set up a multi lingual service desk facility to support its global and local customers. This facility would also provide global support for telecom and mainframe customers worldwide. We see this development as a positive for HCL as Brazil is a fast growing market with new opportunities coming up in the IT space.