Mid, smallcaps favoured today

Tue, 2 Dec Closing

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Indian markets ended the day on a weak note today, with the BSE-Sensex closing lower by about 115 points or 0.4%; the NSE-Nifty closed lower by 31 points or 0.4%. Weakness was seen in stocks from the information technology and automobiles spaces today, while metal and healthcare stocks were amongst the top gainers. Midcaps and smallcaps however seemed to be in favour today as their representative indices - the BSE Mid Cap and BSE Small Cap indices closed higher by about 0.9% and 0.6% respectively.

Stock markets in other parts of Asia ended the day on a firm note, while sentiments in Europe seemed to be buoyant with almost all markets trading positive at the time of writing. The rupee was trading at Rs 61.93 to the dollar at the time of writing.

Stocks of oil & gas companies ended the day on a weak note with Bharat Petroleum Corporation Ltd. (BPCL), GAIL and Indian Oil Corporation (IOC). Given the declining crude oil prices, the government has decided to raise excise duties on petrol and diesel by Rs 2.25 and Rs 1 a litre. This will benefit the government in the form of higher revenues and thus reducing the pressure on fiscal deficit. It is however expected that the excise duty hike will not be reflected in the retail prices. This is the second excise duty hike that the government has taken in three weeks. In fact, it was only yesterday that oil marketing companies had cut prices on the two fuels given the sharp decline in fuel prices in recent times. Currently, the global crude prices are fluctuating at levels of US$ 68 a barrel, which is much lower than the price levels witnessed by crude oil few months back.

Auto stocks closed the day on a weak note today with Mahindra and Mahindra and Bajaj Auto leading the pack of losers. Weakness in these stocks was seen largely due to the not so favourable sales numbers reported by these companies for the month of November 2014. M&M reported a 35% YoY decline in tractor volumes during the month while sales of utility vehicles fell by 18% YoY. The high base effect, coupled with delayed rains, low yields and low prices of crops impacted the sales volumes of tractor segment while the utility vehicles (UV) sales have been seemingly impacted by the narrowing price difference between petrol and diesel coupled with the entry of competition in the UV segment, which has seemingly impacted the company's volumes. As for Bajaj Auto, its domestic sales volumes fell by 6% YoY during the month. This performance is poor when compared to the 36% YoY growth in volumes by TVS Motor; Hero Motocorp on the other hand reported a 3% YoY rise in volumes.