Mid & Small caps evince interest

Wed, 1 Dec 11:30 am

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   09:30 am   

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After starting today's session on a positive note, Indian indices have managed to register further gains. However, other key Asian markets are trading mixed. Currently, heavyweights in the Sensex are trading firm with stocks from the realty and metals space registering strong gains. However, stocks from the IT space are trading flat.

Currently, the BSE-Sensex is trading up by around 216 points, while the NSE-Nifty is up by about 62 points. There has been buying interest amongst the mid and small cap stocks as well with the BSE-Midcap and BSE-Smallcap indices trading higher by 2.3% and 2.7% respectively. The rupee is trading at 45.68 to the US dollar.

Banking stocks are trading strong led by Laxmi Vilas Bank and Yes Bank. In order to benefit from the lower borrowing cost, IDBI Bank plans to raise US$ 1 bn (Rs 45 bn) from overseas markets. The bank plans to raise the funds in tranches by October 2011 and the first tranche of US$ 250-300 m is expected to be raised in the month of January. It may be noted that majority of the Indian banks and corporates are borrowing from overseas markets as cost of funds is lower by at least 300-400 bps when compared to local markets. Although borrowing from overseas markets reduces cost there is a risk of loss if the commitments are not hedged and there are adverse currency movements. It may be noted that IDBI Bank had earlier raised around US$ 500 m through bonds in overseas markets and this would be the second time the bank would tap overseas markets to raise cheap funds.

Energy stocks are trading firm led by Chennai Petroleum and MRPL. As per a leading financial daily, Reliance Industries Limited's (RIL) D1 and D3 gas fields off the east coast in the KG basin have seen a 15% drop in production to about 45-46 million standard cubic meters per day (mscmd). This is because of reservoir complexities. D1 and D3 are among the largest of the 20 oil and gas finds by RIL and its Canadian partner Niko Resources. As per a source, the reservoir is a complex reservoir and has not behaved as previously modeled. RIL will have to drill more wells in the D1 and D3 fields to bring the output to the approved peak of 80 mscmd. Currently 18 wells on D1 and D3 have been completed and hooked on to the production system. However, at present only 17 wells are producing. Nevertheless, RIL is not drilling any more production wells as of now as it is concentrating on finishing the compulsory appraisal of other discoveries it has made in the block. In the absence of drilling appraisal within the prescribed timeframe, RIL would lose that area of the block. RIL is still to complete 4 out the total 22 approved wells for D1 and D3 field development plan.