Mid and smallcaps buck the trend

Tue, 11 Oct Closing

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The early cheers in the Indian stock market spurred by the expectations from the new telecom policy were short-lived today. After strong gains witnessed during the earlier part of the session, the indices failed to retain momentum. Profit booking in heavyweights particularly those in FMCG, IT and energy sectors ahead of the result season saw the indices close below the dotted line. While the BSE-Sensex ended lower by around 21 points, losses on the NSE-Nifty came in at 5 points. The BSE Mid Cap and BSE Small Cap indices however bucked the trend and closed higher.

Most other Asian indices also closed on a positive note whereas Europe too is trading mostly in the red currently. The rupee was trading at Rs 49.36 to the dollar at the time of writing.

Tight liquidity scenario in domestic markets and enhanced borrowing limits from FIIs are expected to prompt infrastructure firms to be dominant issuers in India's corporate debt market. However, the cost of capital for private companies is expected to remain steep especially after the government increased its borrowing target to Rs 2.2 trillion from the budgeted Rs 1.67 trillion in FY12.

Infrastructure Devlopment Finance Company (IDFC) and Rural Electrification Corp (REC) are some of the firms that have announced issuances to take advantage of the new found demand from FIIs. Fears that the (RBI) may continue to raise policy rates to tame inflation despite domestic growth worries may however keep interest costs from slipping lower. This may impact margins in the near term until the firms pass on the interest costs to customers.

Zee Entertainment is planning to launch 3-4 high definition (HD) channels in next financial year, adding to its total of regular 29 channels. Further, the company expects the business to break even between 2013 and 2014.

Zee Entertainment Enterprises (Zee) is one of India's leading television media and entertainment companies. It is amongst the largest producers of aggregators of Hindi programming in the world, with an extensive library housing over 80,000 hours of television content. Zee has gotten into a distribution alliance with Star for distributing the channels of both these media companies. A new company has been formed by the name of MediaPro Enterprise India Pvt Limited and it is a 50:50 joint venture between Zee Turner Ltd and Star Den. This alliance is expected to mutually benefit both Zee and Star in earning better revenues and gaining better bargaining power while dealing with cable operators, multi system operators and direct to home operators.