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Mid & small caps fuel rally
Mon, 4 Apr 01:30 pm

After shedding some of the initial gains, the benchmark indices in the Indian stock market gained momentum during the previous two hours of trade. All the sectoral indices are trading in the green with capital goods, IT and banking stocks leading the pack of gainers.

The BSE-Sensex is up by 207 points while NSE-Nifty is trading 62 points above the dotted line. Both BSE Midcap and BSE Small cap indices are up by 1.67% and 1.54% respectively. The rupee is trading at 44.41 to the US dollar.

Auto stocks are fetching investor interest with M&M, Hero Honda and Maruti Suzuki leading the gains. However, Ashok Leyland and Bajaj Auto are trading weak. In a recent interview, the management of Bajaj Auto disclosed monthly vehicles sales number and the guidance for FY12. With vehicle sales at 3.4 m, the month of March was possibly the best month for the company in FY11. The management also gave a guidance of 20% growth in FY12. This translates into a minimum of 4.6 m vehicle sales, with motorcycles taking the huge share. The management expects Discover 125cc (launched in the last financial year) to play a crucial role in achieving the 20% YoY sales in motorcycle division versus a market growth of 12-14%. Broadly, the guidance was positive with an indication of 0.4 m unit sales for Q1FY12.

Oil and gas stocks are trading mixed with Essar Oil, Guj State Petronet and Chennai Petro trading firm, while IOC, GAIL and BPCL trading in the red. The long pending regulation on Cairn Vedanta deal may see the light of the day on April 6, 2011. It was in August that Cairn had agreed to sell up to 51% stake of Cairn India for US$ 9.6 bn. However, it seemed that the proposed deal would come to a dead-end due to the dispute on royalty. Currently, ONGC which has 30% stake, bears 100% of the royalty costs for the oil fields in Rajasthan. There are chances that the royalty issue might be delinked from the deal, to be taken care of later. In that case, even if the deal is approved, the lack of certainty on the issue will remain an overhang on Cairn India stock.

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