Mid & small caps find favour

Mon, 13 Dec 11:30 am

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After starting today's session on a cautious note in the morning Indian indices have lost initial ground. However, other key Asian markets are trading on a firm note. Currently, heavyweights in the Sensex are trading mixed with stocks from the IT and banking space bearing investors' brunt. However, stocks from the metal and power space are trading firm.

Currently, the BSE-Sensex is trading down by around 117 points, while the NSE-Nifty is down by about 34 points. However, there has been some buying interest amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices trading higher by 0.7% and 1.0% respectively.

Oil & gas stocks are trading weak led by HPCL and BPCL. However, Petronet LNG and Gujarat Gas are trading strong. GAIL India has proposed to set up a 5,500 km of gas connectivity over the next 2-3 years by investing US$ 4 bn. The company plans to add 1,000 km of gas connectivity every year that would help plug the production and demand gap in the country. GAIL is in the process of laying additional pipe lines in the Dadari-Bawana-Nangal and Chainsna-Jhajjar-Hissar region so as to serve the Northern market. It also has plans to lay pipelines in the eastern region connecting Haldia-Jagdishpur. It may be noted that at present there is around 170 mmscmd of natural gas flowing in the country which is expected to increase to 300 mmscmd by 2012 and 442 mmscmd by 2017. As the natural gas resource is not evenly distributed across the country due to lack of infrastructure facilities plans to lay down additional pipelines presents a huge untapped potential for GAIL.

Food & tobacco companies are trading mixed with Ruchi Soya Industries and Nestle trading firm, while Wadala Commodities and GSK Consumer are trading weak. As per a leading financial daily, ITC has stated that it would continue its cigarette manufacturing only after it receives the government's notification on pictorial warnings. It may be recalled that cigarette manufactures were required by the Ministry of Health and Family Welfare to display more severe pictorial warnings from 1st December, 2010. However, on 7th December, 2010, the Union Cabinet decided that the existing pictorial warnings could continue till December 2011. The matter would be reviewed again at that stage. While ITC has enough cigarette stocks at present, the company may face problems if the production shutdown continues for a long time. However, ITC has said that it will resume cigarette production only when the government clarifies what kind of warning it expects on the packs. According to ITC, so far this information is not clear.