Tuesday, 1 September 2009

Small-caps outsmart bigwigs on D-Street

The SME (small- and mid-cap enterprises) space is buzzing with action even as their large-cap counterparts appear to have lost steam amid the downtrend in Asian markets over economic concerns.

Investors have apparently shifted focus to second-rung stocks to take advantage of cheaper valuations vis-à-vis front-run stocks. This is also reflected in sharp gains in mid-cap and small-cap indices in the past few weeks. Many SME stocks, in fact, have been scaling new peaks in the current market, which according to brokers, could be an indication of some revival of interest among retail players.

In the past one month, the BSE Mid-Cap Index, which consists of 221 actively-traded second-rung stocks, climbed 6.5% while the 464-stock Small-Cap Index shot up 12.4%. The BSE 30-share Sensex was up 2.6% during the period. The list of SME outperformers includes 110 stocks which have gained between 50% and 180% in one month. Some of them have frequently been hitting upper circuit limit, say 5%, 10% or 20%, before reaching to the current levels. As many as 323 stocks in BSE’s B-group, which mostly houses second-rung stocks, hit the upper circuit filter on Thursday when the Sensex ended flat at 15,781.

“Investors’ risk appetite remains very high even after the sharp run-up in the market. Valuations of Sensex and Nifty stocks appear a bit stretched, prompting investors to look for value picks in the SME segment” said Centrum Broking’s executive director Sanjeev Patni. He, however, said investments in SME stocks could be more risky than in front-run shares and so the focus should be on the companies with good long term prospects.

While there could be genuine buying driving these shares to the current levels, analysts, however, do not rule out the possibility of speculative interest behind the rally, particularly in stocks of such companies whose fundamentals do not inspire much confidence. Quite a few stocks have risen sharply on low volumes reflecting lack of broader participation in the trading.

“Investors should not get carried away by the sudden frenzy in a particular stock unless they are confident that the company concerned is fundamentally sound and has potential to offer better returns to the shareholder in future,” said an analyst with a Mumbai-based institutional brokerage on condition of anonymity.

While analyst concerns about genuineness of interest in the SMC space may have its merits, the encouraging fact is that at the broader level, trading volumes (quantity of shares traded) in medium- and small-cap stocks have risen significantly in the past few months. BSE’s B-group attracted the daily average volume of nearly 23 crore shares in the current month so far compared with 16.6 crore shares in the previous month.

The volume has shown remarkable improvement in the current year, after declining to as low as 6.3 crore shares in November, 2008. The B-group turnover (value of shares traded) jumped from Rs 1,005 crore in July to Rs 1,500 crore in August.

Source: EconomicTimes

NHPC makes a tepid debut

Shares in state-run NHPC Ltd rose by 5 percent in their trading debut, lagging market expectations after the power company's $1.25 billion IPO was heavily oversubscribed.

The muted debut is the second in a row from a major Indian company and may dampen enthusiasm for future listings.

Last month, shares in private-sector utility Adani Power gained less than 1 percent on their first trading day after the firm raised $630 million.

NHPC, a hydropower company, saw its offering subscribed more than 20 times in the first new listing by a state company in 18 months. India's deficit-wracked government is planning further stake sales in state firms in order to help raise money.

"The listing is fairly below market expectations which was around Rs 40-42," said Ambareesh Baliga, vice-president at Mumbai-based Karvy Stock Broking.

"Promoters of forthcoming IPOs would have to ensure that pricing is not as aggressive as it was in this case. It is a clear signal to them that they should leave something on the table for investors."

At 0532 GMT, shares in NHPC were up 5.3 percent at 37.85 rupees, compared with the IPO price of 36, which was the top end of the indicated band.

The stock touched a high of Rs 39.75 after having made a debut at 37 rupees. The benchmark Mumbai index was up 1.4 percent.

"Pricing was a bit stiff and pressure is coming from people who borrowed money to invest in the IPO," said V.K. Sharma, head of research at Anagram Stock Broking.

NHPC Chairman S.K. Garg told reporters the listing was in line with the company's expectations and the firm was confident about its growth prospects.

The company expects net profit to rise to more than Rs 11 billion ($226 million) in the fiscal year to March 2010 from Rs 10.75 billion last year as it focuses on new projects, he said.

NHPC's capital expenditure in this fiscal year is likely to be Rs 46 billion, Garg said, adding the company had already spent about Rs 20 billion this year on new hydropower projects.

Source: EconomicTimes

Jindal Cotex IPO fully subscribed on final day

The initial public offer (IPO) of the textile firm Jindal Cotex got fully subscribed on the last day of its issue today.

The company received bids for over 1.12 crore shares, the latest data with the National Stock Exchange (NSE) shows.

The Ludhiana-based textile manufacturer has come out to the capital market with an issue size of 1.24 crore shares in the price band of Rs 70-75.

At the upper end of the price band, Jindal Cotex expects to raise Rs 93.40 crore, while at lower end it would garner Rs 87.17 crore.

The company would utilize the IPO fund for setting up a new facility for making cotton yarn and yarn dyeing. It would also invest funds in its two units--Jindal Medicot and Jindal speciality Textiles.

IPO is being made through a 100 per cent book building process. The equity shares are proposed to be listed on Bombay Stock Exchange and on the National Stock Exchange.

Saffron Capital Advisors Pvt Ltd is the lead manager of the offer, while Bigshare Services Pvt Ltd is the registrar of IPO.

Source: EconomicTimes

FIIs continue selling for second day; pulls out Rs 636cr

Overseas investors today pulled out nearly Rs 636 crore from local stock markets, stretching the selling trend for the second day in a row.

Foreign institutional investors (FIIs) were gross buyer of shares worth Rs 2,444.21 crore, while they sold stocks valued at Rs 3,080.15 crore that resulted in a net sell of Rs 635.94 crore, according to the provisional data with the Bombay Stock Exchange (BSE) shows.

However, domestic institutional investors were optimistic and made a net investment of Rs 366.89 crore on stock markets.

Yesterday, FIIs were net seller of shares worth Rs 86.20 crore, as per the data with market regulator SEBI.

Non-resident Indians and brokers, on the behalf of their clients, were also enthusiastic as they made a net investment of Rs 229.07 crore and Rs 3.84 crore, respectively.

Meanwhile, proprietors booked profit and pulled out a net Rs 116.02 crore from the domestic stock markets.

The BSE benchmark index Sensex today fell 115.45 points, or 0.74 per cent to close at 15,551.19 level.

Source: EconomicTimes

Buy Punj Lloyd at any dip to Rs 240-250: Mohindar

Mohindar told CNBC-TV18, "Punj Lloyd on the medium to long term front still looks pretty robust. I feel the stock should probably head to something like Rs 290-300 medium to long term, so if you have that frame in mind, I would not read too much so any dip to Rs 240-250 that window is a possibly a good buying spot for you."

Source: Moneycontrol

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.