Smallcaps in demand today

Wed, 3 Dec Closing

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The Indian markets ended the day on a flat note today, with the BSE-Sensex closing lower by about 1 point and the NSE-Nifty ending higher by about 12 points or 0.2%. Barring stocks from the information technology space, gains were seen across the board with realty and automobile stocks leading the pack of gainers. Midcaps and smallcaps were in favour today with their representative indices closing higher by about 1.4% and 1.6% respectively.

Stock markets in other parts of Asia ended the day on a firm note, while sentiments in Europe seemed to be buoyant at the time of writing. The rupee was trading at Rs 61.89 to the dollar at the time of writing.

Auto stocks closed the day on a weak note today with Mahindra and Mahindra and Maruti Suzuki leading the pack of gainers. Rs 100 invested in the BSE-Auto index a year ago would have been worth close to Rs 160 today. Same amount put in the Sensex at the same time would have been worth a little less than Rs 140. Clearly, auto stocks have been the preferred lot. And within this, stocks of commercial vehicles manufacturers have seen a strong jump in recent times. While the low base effect - back to back decline in volumes of about 25% in each year in FY13 and FY14 - sales volumes of medium and heavy commercial vehicles have been strong in recent months. For the month of November 2014, sales volumes of the top three M&HCV players rose by 54% YoY. It was only since August this year that the growth figures have become positive. And the outlook is expected to remain firm given the declining fuel prices coupled with improving IIP numbers in recent times. Not to mention the improving trend in freight rates, which have been on the rise in recent months on the back of improving fleet utilisation levels.

In other news from the auto space, the Business Standard recently reported that there is a possibility of Tata Motors stopping production of its sedan - Tata Manza - given the dwindling sales volumes of the model in recent times. The average monthly sales volumes of this model this year stood at 130 units only in recent times. Honda's mid size sedan, Honda City - the market leader in this segment - on the other hand has been selling about to 5,840 units a month, with volumes having growth by 200% in the first six months of the current year. As per the business daily, the share of the Manza stands at about 1% within this segment. Also, with the entry of relatively newer models such as Hyundai Verna, Skoda Rapid and Volkswagen Vento, the pressure on the sales volumes of Manza have been increasing. While there has been no official statement from the company regarding this, as per a source of the business daily who is employed at the plant of the auto major, production of the vehicle has been on the decline. However, it is quite possible that the company may be looking to focus its efforts on the prospects of the newer vehicle launched in the segment - Zest.