Small, midcaps buck the trend

Mon, 23 Aug 01:30 pm

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Profit booking led the Indian markets to shed their morning gains and drop into the red during the previous hour of trade. However, currently stocks from the FMCG and banking spaces are the only ones who seem to be under pressure as all the other sectoral indices are trading firm. The overall advance to decline ratio is poised at 1.5 to 1 on the BSE.

Currently, the BSE-Sensex is trading down by around 20 points (down 0.1%), while the NSE-Nifty is trading lower by about 2 points. Stocks from the midcap and smallcap space have however bucked the trend as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.6% and 0.9% respectively. The rupee is trading at 46.64 to the US dollar.

IT stocks are trading mixed with Mphasis and Financial Technologies trading firm while HCL Technologies and Patni Computers are trading weak. As per a leading financial daily, authorities have claimed tax on income earned by outsourcers from sending staff to work with clients abroad and on on-shore software development. Until now, the Indian outsourcing companies had got a tax rebate on on-shore work as it had been deemed exports. With IT companies expecting effective tax rates to rise next year as the software technology scheme expires, this would put further pressure on their bottomline.

Construction stocks are currently trading weak with Hindustan Construction Company (HCC) and Nagarjuna Construction leading the pack of losers. A leading business daily has reported construction major HCC is entering the business segment of building and operating airports. This it would be doing through its wholly-owned subsidiary HCC Infrastructure. The rationale behind the same is to build and operate airports in smaller cities which are expected to grow fast. As per the company, it is evaluating three airports in three smaller cities (as compared to the metros). HCC Infrastructure houses the BOT assets of HCC. Currently HCC has four BOT assets under its portfolio. It may be noted that HCC recently acquired controlling stake in Karl Steiner AG, a Swiss company with expertise in constructing world-class buildings. Among many others, this company has built Terminal-III of the Geneva airport. As per the company's management, HCC would be using Steiner's expertise in getting building contracts for airports in foreign countries as well as in India. However, the company would be looking at starting with domestic airports before venturing abroad.

With this move, HCC will be venturing into an area where its peers, GMR Infrastructure and GVK Infrastructure have the upper hand. While the former operates the Hyderabad and Delhi airports, the latter operates the Mumbai and Bangalore airports.