Small, midcaps outperform Sensex

Fri, 13 Aug 01:30 pm

   Previous Close   

   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

Persistent buying activity led the Indian markets to rise during the previous two hours of trade. Currently, stocks from the realty, consumer durables and banking spaces are leading the pack of gainers, while those from the metal and power spaces are amongst the under performers. The advance to decline ratio is poised at 1.8 to 1 on the overall BSE.

The BSE-Sensex is trading higher by around 150 points (up 0.9%), while the NSE-Nifty is up by about 50 points (up 0.9%). Strong buying interest is being witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are both trading higher by 1.2%. The rupee is trading at 46.6 to the US dollar.

Hotels stocks are trading firm led by Indian Hotel, Hotel Leelaventure and Taj GVK. A leading financial daily recently interviewed Mr. Raymond Bickson, managing director and chief executive officer of The Indian Hotels Co. Ltd (IHCL). This interview is especially significant as it has been on the eve of the reopening of the Palace wing of The Taj Mahal Palace and Tower. According to Mr. Bickson, the company is very bullish on the hospitality industry. Currently, the company has 50 projects on the design board and in development stage. The new projects are expected to add 44 hotels and 12,000 rooms to the hotel's product portfolio bringing the total to about 140 hotels and 38,000 rooms. This expansion would help the company double its revenue to US$ 2 bn. In fact, in FY11, IHCL plans to open 15 new hotels. The company in Mr. Bickson's estimate will require funding of about Rs 19 bn. This would take the debt to equity ratio of the company to 1:1. This is a comfortable level for the company to manage. To counter competition from international players, the company is consciously moving overseas so as to extend the brand to travelers in those markets. This would help the company maintain its market share as more tourists from the overseas markets visit India.

Oil and gas stocks are currently trading firm led by Cairn India, Reliance Industries and ONGC. Indraprastha Gas (IGL) announced its results for the quarter ended June 2010 recently. The company reported a 44% YoY increase in revenues. This growth was led by a 26% YoY increase in overall volumes. While CNG volumes grew by 18% YoY, PNG volumes grew by 103% YoY during the quarter. At the operating level, the company was impacted by higher expenses, which rose by 55% YoY. This led to a 4.9% YoY operating margin contraction. Operating margins during the quarter stood at 32%. The key reason for the same was higher raw material costs, which increased by 5.2% (as a percentage of sales). IGL's reported a net profit growth of 18% YoY during the quarter. The reason for the company reporting a slower profit growth (as compared to increase in operating profits) was lower other income, which dropped by about 78% YoY.