Buying interest shifts to smallcaps

Wed, 8 Sep 01:30 pm

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Indian indices crossed the dotted line and are currently trading flat led by buying in heavy weights in the previous two hours of trade. Stocks from the pharma and IT space are seeing buying interest while stocks from the capital goods and FMCG space are seeing a sell off.

The BSE-Sensex is trading up by 11 points while the NSE-Nifty is trading 1 point above the dotted line. The BSE-Midcap index is up by 0.4% while the BSE-Smallcap index is trading 0.7% above yesterday’s closing. The rupee is trading at 46.69 to the US dollar.

Hotel stocks are trading mixed with Hotel Leelaventure and EIH Ltd. trading firm while Taj GVK and Oriental Hotels are trading weak. As per a leading financial daily, Krishnan Nair, chairman of Hotel Leelaventure has put in place a plan to consolidate control of the company within the family. Under this his two sons have reached an understanding that one brother will not sell the shares he controls to an outsider without offering the stock to the other. Mr. Nair is expected to step down soon and his elder son and Hotel Leela vice-chairman & MD, Mr. Vivek Nair will be the chairman of the company while his younger son Mr. Dinesh Nair, currently joint managing director, will be the vice-chairman. It may be noted that the promoter’s stake in the company as of June 30th, 2010 is 53.37%.

This move comes on the back of ITC’s accumulation of 10.2% of Hotel Leela’s shares in the last 12-15 months. It is being speculated that ITC will turn its attention to Hotel Leela in a takeover bid now that it has been stone walled with Reliance’s investment in EIH. Hotel Leela has been looking to raise cash and prune its Rs 30 bn debt. The company is looking to hive off non-core assets and land banks to generate cash for a US$ 49.9 m FCCB coming up for redemption this month.

Banking stocks are trading mixed with Indusind Bank and SBI trading firm while Axis Bank and HDFC bank are trading weak. As per a leading financial daily, HDFC has relaunched its home loan scheme at slightly lower rates. As reported yesterday, SBI is expected to extend its teaser home loan scheme beyond 30th September and this would have directly hurt HDFC as it had raised its home lending rates. However, with this relaunch, HDFC will offer customers who apply before September 30 and take part-disbursement before October 31 loans an interest of 8.5% up to March 31, 2011, and 9.5% for the period between April 1 and March 31, 2012. Thereafter, the prevailing floating rate will apply. This move is expected to increase competition between the two rivals.