Mid, smallcaps lead gainers

Tue, 28 Sep 11:30 am

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After starting today's session on a volatile note, the Indian indices moved into the negative territory. Other key Asian markets are also trading in weak with Japan down over 1%. Currently most Sensex heavyweights are trading weak with the exception of stocks from the power and consumer goods space. IT and realty stocks are leading the pack of losers.

Currently, the BSE-Sensex is trading down by around 22 points, while the NSE-Nifty is up by about 7 points. Buying interest is witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 0.3% and 0.5% respectively. The rupee is trading at 45.11 to the US dollar.

Auto stocks are trading mixed with Force Motors and Escorts leading the gains. However, Eicher Motor and Tube Investments are trading weak. M&M plans to raise prices of all its vehicle products by upto Rs 8000, effective from October 1st. The range of the hike would be from Rs 3000 to Rs 8000, depending on the car model. This hike is to offset higher raw material costs and implementation of the new emission norms (Bharat Stage III). The company's management however stated that the price rise would be negligible and not impact sales during the festival season. For its top selling Scorpio car, the price hike would be less than 1%.

Other car makers such as Hyundai Motors and Maruti Suzuki had increased prices of their vehicles in recent months. Tata Motors is also expected to follow suit.

NBFCs are trading mixed with Mahindra Finance and Shriram Transport leading the gains. HDFC and IDFC are trading weak. Soon after IDFC announced its Rs 34 bn issue of tax-free infra bonds, Power Finance Corporation (PFC) has also jumped on the bandwagon. The state-run company plans to issue infrastructure bonds to retail investors by the end of December. The company plans to raise more than Rs 10 bn through these bonds. It is in discussion with the Ministry of Finance and the RBI for approving the final issue size. Retail investors who will subscribe to the issue will be eligible for income tax exemption up to Rs 20,000 under the recently introduced section 80CCF of the Income Tax Act. This issue comes as part of PFCs new status as an infrastructure financing company.

Issuance of these infrastructure bonds will allow the company to get a cost advantage of 0.5-0.6% and help in reducing borrowing cost. The company also plans to bolster its capital base by raising fresh equity through a follow-on public offer or QIP in the next 6 months.