Mid and small caps in favour

Mon, 11 Oct 11:30 am

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After starting today’s session on a positive note, Indian indices have managed to hold on to their gains. Other key Asian markets are trading mixed with China up 2.7% and the Nikkei down 1%. Currently, heavyweights in the Sensex are trading mixed with stocks from the IT and power space bearing the brunt of profit booking. However, stocks from the metal and auto sectors are trading strong.

Currently, the BSE-Sensex is trading up by around 90 points, while the NSE-Nifty is up by about 28 points. However, strong buying interest is being witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 0.9% and 1.4% respectively. The rupee is trading at 44.29 to the US dollar.

Banking stocks are trading firm led by Kotak Bank and Bank of Baroda. HDFC Bank will soon be moving away from unsolicited calls to sell home loan products. The company will soon be tapping customers for its group company HDFC through web chats. A customer who is interested in the loan product will log into the chat for details on the same. The person can then fill in details of the loan amount required and salary drawn. After this the person can chat with a sales representative, making it easier and more cost effective for the bank as well.

HDFC bank plans to start selling HDFC’s home loans from later this month. The bank has been selling personal loans through the web chat option as a pilot. 1% of its Rs 4 bn sales have already come through web chats. The company plans to take it to 3% in six months and to 5% in a year. This new feature is expected to work better in metros, where internet penetration is high.

Power stocks are trading flat with Neyveli Lignite and Reliance Infrastructure leading the gains. However, NTPC and GVK Power & Infrastructure are trading in the red. In an effort to tide over the power shortage in the country, government plans to allot projects with a total capacity of 28,000 MW, requiring an investment of Rs 1,400 bn over the next three years. The government has plans to award 7 Ultra Mega Power Projects (UMPPs) over the next few years. This presents huge opportunity for the companies like Reliance Power, Tata Power and NTPC amongst others. Although bid for two projects are in a limbo due to environmental issues the government has already identified locations in Orissa, Andhra Pradesh, Tamil Nadu and Maharashtra for development of other UMPPs. It should be noted that since construction of an UMPP costs around Rs 200 bn, large companies with strong cash flows and healthy balance sheet are prime candidates for bagging these projects.