Midcaps favoured today

Thu, 4 Sep Closing

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The Indian stock markets picked up some steam during the final hour of trade. But the same was not enough to push the benchmark index above the dotted line. The BSE-Sensex ended the day with losses of about 54 points or 0.2%, while the NSE-Nifty ended lower by about 0.2% or 18 points. Stocks from the realty and metals spaces were not in demand today, while those from the FMCG and pharmaceuticals spaces were the top performers. Moving on to mid and smallcaps, the former outperformed other indices as the BSE Mid Cap closed higher by about 0.1%. The BSE Small Cap index closed lower by 0.4%.

Stock markets in other parts of Asia closed on a mixed note today with Japan and Hong Kong closing lower by about 0.3% and 0.1% respectively, while China ended higher by 0.8%. European stocks were trading weak at the time of writing. The rupee was trading at Rs 60.45 to the dollar at the time of writing.

Auto stocks ended the day on a mixed note with Tata Motors and Ashok Leyland leading the pack of losers, while Bajaj Auto and Hero Motocorp led the pack of gainers. Auto sales volumes continued to remain strong for the fourth month in August 2014. Maruti Suzuki reported a 27% YoY rise in volumes, while Hyundai and Honda reported a 19% YoY and 88% YoY increase in volumes. Key reasons for this spurt have been the change of sentiments post the elections coupled with the fact that volumes were subdued for a long time, leading to pent up demand. However, it seems that this trend is not seen across the board as only certain car makers have reported strong numbers. For instance, as reported by a leading business daily, Ford India's domestic sales fell by 15% in August while GM's volumes fell by 37%. Making the most of this uptick in sentiments, it seems auto companies have lined up a number of new launches - especially in the low cost segment. In fact it is the entry level car segment that is expected to drive growth over the longer periods as the aim is to increase demand from two-wheelers users. As per industry figures, the car penetration levels in India are 15 for every thousand people as compared to 60 in China and 200 in Brazil; thereby giving a strong indication of favourable long term trends.

Godfrey Philips, TVS Motor and UPL were amongst the top performers from the midcaps space today. As per a leading business daily, on expectations of an economic revival, foreign institutional investors (FIIs) have been favoring investments in midcap stocks of late. Expected reforms that will encourage a revival of the growth of the economy by the new NDA government have been driving this trend. As per reports, FII ownership for mid caps is at an all time high of 15% currently. This moved up higher by 50 basis points during the June 2014 quarter. FIIs now own US$ 36 bn in stocks that constitute the BSE Mid Cap Index.