Mid & Small caps lose sheen

Fri, 26 Nov 11:30 am

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After starting today's session on a positive note, Indian indices have slipped into the red. Other key Asian markets too are trading weak. Currently, heavyweights in the Sensex are trading in the red with stocks from the realty and consumer durables space registering a free fall. However, stocks from the IT space are trading flat.

Currently, the BSE-Sensex is trading down by around 235 points, while the NSE-Nifty is down by about 75 points. Buying interest amongst the mid and small cap stocks is muted as well with the BSE-Midcap and BSE-Smallcap indices trading lower by 4.7% and 6.0% respectively. The rupee is trading at 45.70 to the US dollar.

Steel stocks are trading weak with Bhushan Steel and Tata Sponge leading the pack of losers. Tata Steel is eyeing acquisitions so as to boost capacity in order to meet the rising demand in both domestic and overseas markets. Right now the company has operations in Europe and South Asia and is on the look out to enter new countries to set up steel plants. In view of this, the company is already in the process of securing clearances for a 5 m tonne integrated steel plant in Vietnam. Further, it is also charting out plans to boost its capacity in India. As India is a growing market where the capacity is expected to increase to 10 m tonnes in the future from 7.5 m tonnes currently, the strategy to expand operations in domestic markets will enable the company to expand/retain its market share in view of any unanticipated shocks in the US or Euro zone.

Auto stocks are trading weak led by Ashok Leyland and Eicher Motor. As per a leading financial daily, Maruti Suzuki plans to expand its service network. The company plans to sell around 1.2 m cars this fiscal. To service the increased number of new cars and provide effective service to its existing customers, Maruti plans to set up over 200 new company owned service centers by the end of FY11. This will bring the number of company owned service centers to 3,040. With this expansion, Maruti hopes to have a service center within 25 km of every Maruti car owner. To man these service centers, Maruti plans to hire 3,000 employees within the next four months. This represents 10% of the company's current work force. Of the 200 new centers, 61 centers are being added in south India while 51 are being added in north India. 46 and 48 centers will be added in east and west India respectively. The move is considered significant as Maruti faces tough competition from several international carmakers, which are set to launch new small cars.