Market Close: Is this the End of Mid cap Mania ?

Small and mid cap contiued its uptrends from the start despite a weak start for Indian Indices. Globally markets slipped as US ended in red on the back of low Home sentiments and Down grading of Citi Bank by Goldman sachs. Indian Indices traded ranged with bouts of profit booking at regular intervals post a weak start. Midcaps and Small caps starred till the mid session but the final hour witnessed intensified profit booking which dragged the indices in the negative territory. Mid caps had good rallied for the day but was also not spared as it too went for profit booking while the small cap counter struggled to remain in the positive territory. The major losers for the day were on the Banking, Consumer Goods, Power and Auto counters. Billion Dollar expansion plans of Unitech failed to attract investors towards the stock. DLF had also announced private equity placement yesterday. However, The reality index ended in red. European indices continued to trade mixed.

Indian atomic official would start talks this week with the International Atomic Energy Agency (IAEA) as part of efforts to clinch a landmark nuclear deal with the US. This brought some strength in the front line stocks. However, the movement in the index heavyweights was limited. More clarification regarding the Indo US nuclear deal can be expected after November 27 when the issue would be on the agenda of the parliamentary discussion.

Sensex closed lower by 353 points at 19280.801. Weighing on the Sensex were the losses in Hindalco (194.15,-6 percent), BHEL (2654.2,-5 percent), Maruti (1010.25,-4 percent), Infosys (1564.4,-3 percent) and ONGC (1221.5,-3 percent). Losses were restricted by gains in Tata Motors (707.85,+1 percent), Guj Ambuja (148.25,+0 percent), HLL (205.3,+0 percent), Bajaj Auto (2429.6001,+0 percent) and Dr Reddys (617.3,+0 percent).

The possibility of increase in the foreign direct investment in the cable TV business was the primary reason for the rally of Dish TV which ended higher by 7% for the day. The present cap of investment in the cable TV business is 26%. Company recently reported its results for the September ended quarter. The bottom line of the company reported a loss, despite the growth in Topline. The Competition intensifing with companies like Tata, Reliance and Bharti is also set to price in the cable Tv business. This could result in delaying the break even period for the company and the losses would continue. We are not buyers of the cable tv business at the moment under the present market scenario. Any fresh position in the company is not recommended on the back of possibility of rise in cap of investment by foreign partner.

Karuturi networks one of the splendid stocks which we started tracking. The Company has become the largest cultivator of roses In the world post the Kenyan acquisition. The company has a total capacity of 650 mn stems. It has 10 hectares in India with 10 mn stems capability inhouse and another 25 mn stems which are managed through contract farming. 100 hectares are operational in Ethiopia with a capacity of over 100 mn stems. Karuturi Networks has been allotted additional 450 hectares of land by the Government of Ethiopia for its expansion and diversification projects. The results of the September ended quarter were impressive as well. The valuations seems to be fair considering the business potential of the company. Do read our note on the company for investment rationales and to know why we like the business.

Hunt of the investors for companies with strong business fundamentals drove Balkrishna Ind higher by 4% for the day. The Company specializes in the manufacturing of the off the road tyres (OTR) which derives 85% of the revenues to the group. The rest are from the paper, fabric and wind power businesses. 75% of the company?s products are exported. Exit by global players from the OTR segment turned situation in favor of the company. The competition from the other players like Apollo and Jk Tyres in the OTR segment seems to be in the nascent stage. Company intends to hike the prices of its products in this quarter to counter the impact of Rupee appreciation and higher input costs. The numbers reported for the September ended quarter were encouraging. Do read the quarterly analysis of the company and why we are positive on the business.

Technically Speaking: Sensex traded in narrow ranged from the start but selling pushed Indices over 450 points before ending at 19280 levels. Sensex made an intraday high of 19,690 and low of 19,240. Advances seem to have edge against the declines despite profit booking witnessed in the later part of session. Support for sensex is at 19,275 while nifty finds support at 5,750. Resistance is at 19,975 levels. Bias remains positive so long as NIFTY does not close below 5725..