Small, midcap in favour today

Mon, 7 Oct Closing

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The Indian markets ended the day on a negative note despite witnessing strong buying during the post noon trading session. The BSE-Sensex closed the day lower by about 20 points, while NSE-Nifty ended lower by about 18 points. Stocks from the banking and capital goods were amongst the top losers, while those from the metal and information technology spaces were amongst the top underperformers today. BSE Mid Cap and BSE Small Cap stocks seemed to be in more demand today as their respective indices ended the day on a firm note.

As regards global markets, Asian indices ended on a weak note. Sentiments were dull in the European markets as the indices largely opened in the red. The rupee was trading at Rs 61.87 to the dollar at the time of writing.

Stocks of aluminium companies ended the day on a firm note with Hindalco and National Aluminium company (Nalco) trading firm. A leading business daily has reported that the Nalco may invest Rs 50 bn to expand its alumina refining capacity. As per the company's management, capacities will be increased by 43% to 3.3 m tonnes over a two year period, with surplus quantities being exported. The company will however be finalizing the plan by the end of the year. This is expected to be a positive for the company given that the margins in this segment are much higher as compared to metal prices. Also due to lower metal prices, the alumina segment has become all the more attractive segment to operate in. The company is also seeking to form a venture with Gujarat Mineral Development Corp. to set up another 1 m tonne refinery in Gujarat. The company will hold a 51% stake, while Gujarat Mineral has evinced interest for 26%.

According to a leading financial news daily, listed companies now will have to shell out higher bucks for Corporate Social responsibility (CSR) spend for the current fiscal year. This is in-line with the new Companies Act. For FY14, the liability under the above component would amount to Rs 87 bn given that the Indian Inc's profitability grew at CAGR of 7.5% in the past three years. According to the new Bill, the CSR spend has been made mandatory for every company with a net worth of Rs 5 bn or more or turnover of Rs 10 bn or more or a net profit of Rs 50 m or more during any financial year. With this new measure, Oil and Natural Gas Corporation (ONGC) will turn out to be the country's largest spender on CSR. Its contribution would amount to Rs 5 bn based on the past three years' numbers. The Tata Group and the Aditya Birla Group are also in the list that is active in its respective CSR activities. India Inc is considering this move a positive development which will help them earn further goodwill of locals. It will also make them participate in the government's inclusive growth agenda.