Small, midcaps outperform their larger peers

Thu, 2 Aug 01:30 pm

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   09:30 am   

   11:30 am   

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Although they cut some of their morning losses, the Indian equity markets continued to trade below the dotted line during the post noon trading session. Stocks from the power and capital goods sectors are trading firm while those from the Oil and gas and banking spaces are amongst the top losers at the moment.

The Sensex today is trading lower by about 40 points (down 0.2%) while the NSE-Nifty is trading lower by about 14 points (down 0.3%). However, midcap and smallcap stocks seem to be in favour as the BSE Mid Cap and BSE Small Cap indices are trading higher by about 0.2 and 0.3% respectively. The rupee is trading at 55.76 to the US dollar.

Auto stocks are trading weak with index heavyweights Tata Motors and Mahindra & Mahindra (M&M) trading weak. Bajaj Auto's sales in July slipped 5% on a YoY basis to 344,150 units amid weak demand for new motorcycles, especially in the premium segment. The company is a dominant player in this segment with its Pulsar range of bikes. Three-wheeler sales also continued to be slow. Motorcycle sales in July declined 3% to 308,858 units, while three-wheeler commercial vehicle sales slumped 23% to 35,292 units. Over the April-July period, Bajaj Auto's total sales declined 2% to 1.4 m units. Exports were also weak, falling 13% to 125,501 units in July. Exports were hit after a sharp hike in import duties by Sri Lanka in April. Earlier the company used to export 10,000 units each of two-wheelers and three-wheelers. But shipments to the nation dropped to nil after the distributor there focused on clearing out existing inventory following the duty hike. Cutting prices by around 10% also didn't help matters much. Besides Sri Lanka, the manufacturer's exports to Egypt were also impacted due to political unrest in the county. However, the company stated that there has been some recovery in both these markets thus a better performance is expected in August. The stock was trading 0.3% lower at the time of writing.

Engineering stocks continued to trade on a mixed note with Voltas Ltd and Thermax Ltd trading in the green while Finolex Cables and Blue Star Ltd were trading in the red. Engineers India Ltd recently announced its first quarter results for the financial year 2012-2013 (1QFY13). The company's top line declined by 15.7% YoY during the quarter. This was on account of a 25.2% YoY decline in the revenues from turnkey projects' segment. However, the consultancy & engineering projects segment registered a muted increase of 4% YoY during the quarter. Due to an increase in sub contract payments, the operating margins registered a decline of 0.1% YoY during the quarter. Operating margins declined to 21% from 21.1% seen during the same period last year. The increase in sub contract expenses was mitigated to some extent by the savings in cost of construction materials. Despite the decline at the top line level as well as the lower operating margins, net profits increased by 4.2% YoY. This was due to the higher other income during the quarter.