India Smallcaps - High Quality Plays

 India Smallcaps - High Quality Plays 

Small and Midcap Picks

Small and Midcap Picks

India Small Cap and Midcap Stock Picks

India Small Cap and Midcap Stock Picks

5 worst small cap stocks - 2009

The year 2009 for Dalal Street proved to be a highly volatile. The beginning of the year was gloomy, the mid-year was quite good, while the ending came as a sparkling shock with good Q2 GDP numbers, strong IIP figures and stimuli provided by government.

Indian equities earned over 75% returns in the year 2009 outperforming global markets by a wide margin. Global markets witnessed a marginal rise of over 20%.

As someone has rightly said, ``There are two sides of every coin``; this is applicable to stocks too. While few stock outperformed the Sensex returns, few stocks underperformed.

Let`s have a look at the `5 worst performing small cap stocks` which plunged to almost half of its values in the year 2009 as against their highs in a year ago.

> Austral Coke and Projects

Austral Coke and Projects, engaged in the manufacture and sale of low ash metallurgical coke and refractory in India is the leading worst performing stock in the small cap index. Stock price of the company plunged 91.53% to stand at dismal Rs 9.06 a share as on Dec. 23, 2009 as against Rs 107 as on Dec. 31, 2008.

Why all of a sudden downside in a scrip price? This could be attributed to the capital market watchdog, Securities and exchange board of India (SEBI) finding fraud transactions on their accounts and not permitting them to raise money. SEBI barred it from raising any fresh equity after the income tax department exposed an alleged more than Rs 10 billion fraud in the company`s transactions.

The company has a market capitalization of over Rs 2,676 million. The P/E ratio is Rs 9.18.

> Ramco Industries

Ramco Industries, a leading manufacturer of fiber cement sheets, pressure pipes, accessories & allied building materials and cotton yarn is the second nastiest performing stock from small-cap index that fallen over 86% to Rs 53.50 as on Dec. 23, 2009 from Rs 408.25 a share as on Dec. 31, 2008.

The company`s market cap is Rs 4571.48 million. The P/E ratio is Rs 16.84. P/BV is at 0.11.

> Shree Ashtavinayak Cine Vision

Shree Ashtavinayak Cine Vision, engaged in film production, distribution and exhibition is the third stock falling 85% from Rs 499.3 a share as on Dec. 31, 2008 to just Rs 74.9 as on Dec. 23, 2009. The company`s market cap is Rs 8036.89 million. The P/E ratio is Rs 40.52.


> Hindusthan National Glass & Industries

Hindusthan National Glass & Industries, engaged in making all kinds of glass containers is the fifth stock which plunged over 75% in the year 2009 to stand at Rs 137.2 a share against Rs 556.95 a share as on Dec. 31, 2008. The company`s market cap is over Rs 12,214 million. The P/E ratio is at Rs 7.84 while P/BV is at 1.12.

>Vishal Information Technologies

Shares of Vishal Information Technologies, involved in areas of data digitization & conversion, e-publishing, digital library solutions and print on demand conversion lost over 96% to stand at Rs 11.71 a share as on Dec. 23, 2009 as against Rs 301.35 as on Dec. 31, 2008. The company`s market cap is Rs 3,019.97 million.

via IRIS

5 best small cap stocks - 2009

The year 2009 proved to be a very scintillating year for the equity markets, across the globe, particularly for markets like India, which are still emerging.

India`s benchmark 30-share index, the Bombay Stock Exchange (BSE) Sensex is been amongst the best performers across key world markets during the current year, gaining more than 75% so far.

The small cap companies performed outstandingly too. This is evident from the fact that BSE Small Cap index, witnessed a 2.2 times yearly rise, as on Dec. 24, 2009.

Let`s have a glimpse of 5 star performers among the Small cap stocks in 2009 which have managed to make a mark while many others have failed:

Ahluwalia Contracts India:

Ahluwalia Contracts India (ACIL), a New Delhi based civil engineering contracting firm is engaged in construction of malls, hospitals, educational institutes, commercial complexes, luxury hotels, corporate office complexes, and multistoried residential complexes.

Stock price of the company zoomed 516.61% to stand at Rs 180.05 a share as on Dec. 23, 2009 as against Rs 29.2 as on Dec. 31, 2008.

Its stock performance during the year can be mainly attributed to factors like, during the year the company bagged new projects and orders nearly worth Rs 15.28 billion. Also it reported 63.80% growth in its NPAT for September quarter 2009.

OCL Iron and Steel:

OCL Iron and Steel mainly engaged in manufacture and sale of steel billets and sponge iron. These products are used by producer/manufacturer of finished/semi finished goods. It manufactures power from waste heat available at the sponge iron plant and also from coal.

Stock price of the company jumped 515.47% to stand at Rs 27.45 a share as on Dec. 23, 2009 as against Rs 4.46 as on Dec. 31, 2008.

Jindal South West Holdings:

Jindal South West Holdings (JSWHL) is a non-banking financial company (NBFC) registered with Reserve Bank of India (RBI). Its main business activities involve investment in shares, stocks, or other securities in India or abroad. It also provides management consultancy services for customers in finance, organization, management, commencement or expansion etc.

Stock price of the company zoomed 499.90% to stand at Rs 1,807.5 a share as on Dec. 23, 2009 as against Rs 301.3 as on Dec. 31, 2008.

Jindal South West Holdings` net profit rose 31.2% in Sep Q2 `09 over Q2 September 2008.

Kiri Dyes and Chemicals :

Kiri Dyes and Chemicals is a manufacturer and supplier of high quality dyes and intermediates for the dyestuff industry.The company also has has a well established customer base in India and countries like Korea, Turkey, Taiwan, Bangladesh, USA, and Canada among other countries.

Stock price of the company zoomed 497.81% to stand at Rs 627.7 a share as on Dec. 23, 2009 as against Rs 105 as on Dec. 31, 2008.


During the year Kiri Dyes reported many developments like acquisition of DyStar Group and its selective assets through insolvency, incorporation of wholly owned subsidiary named Kiri International Hong Kong abroad also its net profit for Sep quarter jumped 72.32% as against same period in the prior year.


Ajmera Realty and Infra India:

The company is engaged in the manufacture of pre-coated steel strips/aluminium strips, which are cold-rolled and galvanised. The product-mix includes alkyd/polyester coated and PVC laminated cold-rolled and galvanised coils. The group also has strong presence in the fields of textiles, printing, information technology and entertainment.

Stock price of the company zoomed 473.24% to stand at Rs 215.25 a share as on Dec. 23, 2009 as against Rs 37.55 as on Dec. 31, 2008.

While 2009 was seen as year with a clear uptrend market, 2010 is expected to be a volatile year driven by event risks which will trigger the direction, but still keeping our fingers crossed we hope that `small still remains beautiful` in the coming year too.

via IRIS

Small Caps

Small Caps

Mid-caps, small-caps stage comeback

BSE Mid-Cap and Small-Cap index outperform the Sensex.

The BSE Sensex gained 234.66 points or 1.43% to 16,151.51.

The BSE Mid-Cap index rose 223.78 points or 3.31% to 6,991.70 and the BSE Small-Cap index rose 306.99 points or 3.72% to 8,555.72.

Shree Renuka Sugars (up 19.13% to Rs 1,052), Motherson Sumi (up 18.35% to Rs 108.05), Engineers India (up 15.97% to Rs 798.95), National Fertiliser (up 13.97% to Rs 54.25) and Asahi India Glass (up 12.27% to Rs 83.70), were major mid-cap gainers.

The BSE Mid-Cap index had hit a 52-week high of 10,245.81 on 8 January 2008 and a 52-week low of 5,191.88 on 3 April 2007.

The BSE Mid-Cap index had underperformed the market over the past one month till 10 March 2008, declining 11.34% compared to the Sensex’s fall of 8.82%. It had also underperformed market declining 26.33% compared to sensex’s decline of 21.52% over last quarter.

English India Clay (up 20% to Rs 1,006.55), Deepak Fertilisers (up 20% to Rs 105.75), Geojit Financial Services (up 19.01% to Rs 52.90), Lloyd Electric (up 17.76% to Rs 119) and CCL Products (up 16.75% to Rs 184.70), were major small-cap gainers.

The BSE Small-Cap index had hit a 52-week high of 14,239.24 on 8 January 2008 and a 52-week low of 6,242.16 on 16 March 2007.

The BSE Small-Cap index had underperformed the market over the past one month till 10 March 2008, declining 16.85% compared to the Sensex’s fall of 8.82%. It had also underperformed market declining 29.3% compared to sensex’s decline of 21.52% over last quarter.

Midcaps, Smallcaps

Midcaps, Smallcaps

Small cap mania - ready to join?

Is bungee jumping or a thrill-a-minute roller-coaster ride your idea of having a good time? If it is, then small-cap investing may be your preferred route to stock market riches. Unlike sedate blue-chip stocks that need to be held for several years to turn in a three-digit return, small-cap stocks can turn multi-baggers in a matter of months, especially if aided by a raging bull market (needless to say, small-caps are equally prone to nose-diving at the first sign of a ma rket reversal).

If you have the risk appetite to invest in them, take note that the party in small-cap stocks is already well underway. You may have to act quickly to capitalise on the recent wave of optimism towards the less-known names of India Inc.

Small-caps were barely ahead of their larger counterparts in the stock market rally between June 2006 and August 2007 that saw the Sensex surge by 42 per cent. But they have been the life and soul of the party in the most recent phase of the rally.

Since August 2007, the BSE Small-cap Index, with a return of 60 per cent, has easily trounced the Sensex (44 per cent). These index returns actually understate the case. Over 50 stocks in the BSE Small-cap index have doubled in this three-month span, while 12 have gone up three-fold or more.

As with large-caps, multi-baggers within the small-cap space feature several stocks with astronomical PE multiples.

This is a clear sign that gains in some cases have been driven by speculative froth rather than by hard fundamentals. Reliance Industrial Infrastructure, Nalwa Sons, Marksans Pharma and Walchandanagar Industries are some of the chart-toppers that fall into this category.

Another unusual trend in the recent small-cap rally is that stocks with high institutional interest haven’t delivered better gains than those with low institutional holdings.

Many of the stocks from the top performers list (State Trading Corp, Reliance Industrial Infrastructure, Lloyd Steel) have marginal or nil stakes held by FIIs.

This reinforces the belief that the recent rally in small-cap stocks has been driven largely by individual investors, whether of the retail or high-net-worth variety, rather than by institutional buying.


Fundamentals do work

But this is not to say that selecting small-cap stocks based on their fundamentals has not been a rewarding proposition. Investors who did buy into small-caps with good businesses would have pocketed hefty gains in the past three months.

Companies in niche businesses such as equipment finance company — SREI Infrastructure Finance (154 per cent return), earth-moving equipment maker-TIL (149 per cent), Alphageo — a provider of seismic survey services (145 per cent) and investment bank IL&FS Investmart (128 per cent) are such examples.

These companies owe much of their gains to a re-rating (expansion) in their PE multiple, as investors recognised and priced in bright growth prospects for their business.

It is also a misconception that the small-cap basket consists only of obscure companies with an uncertain pedigree. The small-cap index is home to some companies that do occupy leading positions in their respective businesses — ICRA (rating services), Gokaldas Exports (garment exports), Rallis India (crop protection) and PVR (multiplexes) are cases in point.

The small-cap space also features several “sunrise” businesses — multiplexes, construction equipment, logistics, financing and broking, seen as having a high linkage to the India growth story. Some of these sectors don’t find a representation in large-caps. This makes for rich pickings in this segment of the market. Companies in businesses such as metals, capital goods and financial services have been the frontrunners in the recent small-cap rally. The trend is now showing signs of expanding to engulf companies in businesses such as logistics, realty and media.
FIIs deepen exposures

Research apart, how can investors identify sound small-cap stocks to add to their portfolio? If safety of capital is your prime concern, institutional interest in the stock may be a good filter to apply (despite recent market trends).

Eight out of every ten stocks in the BSE Small-cap index featured at least a marginal holding by FIIs or mutual funds, based on their latest shareholding pattern. This suggests that only a few stocks in the small-cap space are yet to be unearthed by FIIs or domestic mutual funds. Should investors take exposures to the under-owned stocks, in the hope that they would attract institutional interest at a later date?

While this strategy may work quite well for large-cap stocks (which are high on the shopping list for institutions), this may not be a good approach to take to investing in small caps, for two reasons.

For one, institutional investors haven’t sharply expanded their investment universe within the small-cap basket over the past year, despite ample opportunity; instead they have chosen to increase exposure to their existing holdings.

The markets have swung from 10,000 levels last June to over 20K in recent weeks. Yet, the number of small-cap stocks that have FIIs/mutual funds on board has registered a relatively small change in this period.

Domestic mutual funds, if anything have been even more circumspect than the FIIs, not at all entering any new small-caps in this period. On the other hand, there are several instances of companies where institutions have significantly increased their stakes.

These trends suggest that both FIIs and mutual funds have been cautious about adding new small-cap names to their portfolio. Instead, they have preferred to stick to businesses and stocks they are familiar with.

Given that the rally in small-caps has been underway for some time now and that valuations of these stocks have climbed considerably, it may be best for retail investors to stick to safe ground, when it comes to small-cap investing.

At this juncture, stocks that have seen a significant increase in institutional interest, either from FIIs or domestic funds, may be a good hunting ground. Logix Microsystems, Lloyd Electric, South Indian Bank, SREI Infrastructure Finance and Nitco Tiles are some of the stocks that have seen a significant accretion to FII holdings over the past year. Madhucon Projects, McNally Bharat, Subros, TV Today, Greenply Industries and TV Today have seen domestic fund managers hike their stakes significantly between last June and this September.
No pain no gain

While the return potential offered by small-cap stocks cannot be gainsaid, those keen to enter such stocks should also bear the following in mind:

Earnings disappointments from small-cap companies can lead to sharper declines in their prices than would be the case with large-caps.

As such, companies are typically under-researched and there are uncertainties about their prospects; their ability to sustain earnings growth from quarter to quarter thus becomes an important reference point for investors in such stocks.

That the recent rally in small-caps has been driven largely by re-rating (expanding PE multiple), rather than by earnings growth, makes the gainers particularly vulnerable to any disappointment.

As a reversal in a small-cap stock can be quite swift and accompanied by thinning volumes, investors should probably adopt a target price-based approach to taking profits in small-caps.

If small-cap stocks can deliver manifold returns in a matter of months, the downside can be equally swift.

On every occasion when the Sensex has suffered a sharp setback over the past five years, the BSE Small-cap index has taken a much sharper plunge.

In the stock market correction of May-June 2006 the BSE Small-cap index nose-dived by 27 per cent, when the Sensex corrected by 12 per cent.

Investors keen to shelter from such storms should set aside a fixed portion of their portfolio for small-cap stocks. Re-balancing at periodic intervals, to contain small-cap exposures, may be necessary.

Finally, the current valuation levels enjoyed by small-cap stocks as a class, also raise flags of caution. The rally between August and now has ramped up the PE multiple of the BSE Small-cap index from 16 to 25 times (on past earnings), in a matter of three months. This has substantially narrowed the valuation gap between the large caps, as represented by the Sensex, and the small-caps.

Given that small-caps do deserve to trade at a discount to the large-caps, this leaves limited room for further ‘re-rating’ of the former. This suggests that the action may now be restricted more to “value” picks among small-caps.

It is also worth noting that the last major corrective phase in the markets (in May 2006) came about when the BSE Midcap and Smallcap indices moved into a valuation premium to the Sensex.

The rapid rise of some of the small-caps, heightened speculative activity, and the fact that the PE multiple of the BSE Smallcap index is now at a new high, should all be considered as warning signs by investors tempted to go overboard with small-cap investments

Small, Midcap Construction Ideas

Small, Midcap Construction Ideas

Small cap picks!

Akar Tools (Rs 37.10): Quick, if you were being offered for Rs 22 crore a company with the possibility of earning Rs 9 crore in EBIDTA (earnings before interest, depreciation and tax) during the current financial year, would you yawn or call your merchant banker by reflex action?

And this is my pitch for this Aurangabad-based hand tool and leaf spring manufacturer, which surprised with a double digit EBIDTA margin in the first quarter of 2007-08 on a total income of Rs 17.83 crore and an equity of Rs 5.40 crore.

If you don’t trust these numbers, consider this: hand tool capacity increased from 2,400 tonne per annum (tpa) to 3,600 tpa last December and leaf spring capacity will increase from 3,600 tpa to 12,000 tpa by the last quarter of 2007-08 – all financed through internal accruals and debt.

Scale will address the growing demand of leaf springs from OEMs, and the product mix will evolve from conventional leaf springs to value-added parabolic springs. At full blast that could be a top line of Rs 140 crore at slightly better margins in 2008-09. Now reach for your calculator.

Indag Rubber (Rs 42.65): The biggest pre-cured tread rubber brand in India is the venerable Elgi, right? And the second biggest? Pakde gaye na? The industry leader enjoys a market capitalisation of around Rs 100 crore and the number two? A mere Rs 22 crore. And that is the mother of all my arguments for Indag, the crown prince.

The numbers come later: Indag’s first quarter EBIDTA in the current year was the fifth straight quarter-wise increase, peaking at Rs 2.51 crore this latest quarter; EBIDTA margin increased across each of the last four quarters; Elgi enjoyed an EBIDTA margin of around 10 per cent for 2006-07, whereas Indag’s was 14.57 per cent in the first quarter of this year; interest cover increased across each of the last five quarters peaking at 6.44 this latest quarter.

This is the nugget I like: its weight-mileage ratio is considered among the best in the industry; its technology, developed in-house, enabled it to more than neutralise the disadvantage of moving out of collaborator Bandag’s shadow (now a Bridgestone company); its export exposure is increasing now that the collaborator is out of sight; its low asset utilisation of only around 62% in 2006-07 is what my friends in the market call a high operating leverage; it can enhance overall capacity by 50 per cent at a negligible cost through a transfer of assets from its erstwhile Rewari plant.

This is what I like about its industry: roads are improving and truck overloading is declining so tyres are being protected enough to deserve a retread instead of being chucked; expensive radialisation means that users would rather retread tyres than throw away; large transporters are more likely to go in for organised retreaders for enhanced reliability and mileage; decline in sales tax in some states to 4 per cent is narrowing the differential between the organised and unorganised players, widening the market and strengthening Indag’s margins.

Jhunjhunwala Vanasapati (Rs 80.80): Welcome to the next edition of Battle of Biases. If I told you that this company makes vanaspati and mustard oil, you are likely to turn up your nose and say, “Sunset business”.

But if I told you that the name of the company was Sterling Foods or something and that it was likely to report a turnover of Rs 1000 crore-plus in the current year, your first reaction would be, “What a franchise!”

If I told you that this is a 3 per cent EBIDTA business, you are likely to pass some uncharitable remarks about the intention of the management. But if I told you that the worst interest cover in the last five quarters was still a little over 8, you would be tempted to say, “Cash rich”.

If I told you that the company was headquartered in Benaras, your first reaction would be “Governance konni!” But if I told you that EBIDTA has increased across every single quarter of the last five quarters and the company quotes for a mere market cap of around Rs 65 crore against a projected EBIDTA of around Rs 30 crore for the current year, you are more likely to sheepishly concede “Accha, chalo aap bolte hain toh…”

Sree Rayalaseema Hi-Strength Hypo (Rs 21.05): The rewarding thing about trawling the papers day in and day out is that one day god may smile and say, “Bachcha, I am pleased with your devotion. I shall grant you a bargain penny stock that shall be hidden from public view as long as you want it.”

The moment manifested in the form of SRHSH. Looks at its 2006-07 financials: equity of Rs 10.18 crore, EBIDTA of Rs 13.2 crore, tax paid at 34 per cent, EPS of Rs 5.61, market cap of Rs 22 crore. First reaction: oh, one-off. Then SRHSH surprised with its first quarter: an EBIDTA of Rs 3.49 crore and an interest cover of 9. Nine!

SRHSH manufactures calcium hypochlorite and monochloroacetic acid; the former is being increasingly preferred as an environment-friendly alternative for chlorine in swimming pools and water purification the world over.

The company exports nearly all of this product so the results that you see in the first quarter of this year is after the impact of the rupee’s appreciation. The company manufactures the product through the specialised sodium route, developed in-house, mastered only by a few companies in Asia.

This is my turn-on: SRHSH has embarked on an expansion of its sodium hypochlorite capacity by 50 per cent and its monochloroacetic acid capacity by more than 100 per cent; out of internal accruals and debt, if you please; these will translate into reality by the end of 2007; enhanced utilisation should translate into revenues of Rs 160 crore for 2008-09. If margins are maintained, shareholders could be laughing all the way to the AGM. Provided it is not in Kurnool, Andhra Pradesh!

WS Industries (Rs 82.05): Suddenly, half of India including my mother-in-law is bullish on this porcelain insulator company.

The reasons: India’s considerably-under-provided power transmission sector is the next big thing, the country’s transmission lines are graduating towards higher voltages, Power Grid’s next mega tender is around the corner, global opportunities are emerging in East Asia, Latin America, North America, North Africa and Europe (going through aggressive line refurbishment) and the insulator industry growth of 12-15 per cent over the last three years of the Tenth Plan is going to lead to an average 20-22 per cent per year in the Eleventh Plan.

So what does all this mean for dear WS? An order book for more than a year, a new plant under commissioning which will enhance capacity from 16,000 tpa to 27,000 tpa, additional capacity to go on stream in the first quarter of the next fiscal, project funded through a private placement (equity already diluted) and enriched product mix (first to develop products for the 800 KV line and is working on the 1200 KV line) will strengthen margins, a debt-equity ratio of less than 1 will translate into improving interest cover and the company possesses a full-blast revenue potential of around Rs 350 crore.

Now look over your shoulder. A company with large exports, WS Industries reported its highest ever EBIDTA margin in the quarter when the dollar slumped, interest cover rose almost every quarter over the last year; the company reported five quarters of back-to-back EBIDTA growth into the first quarter of the current fiscal; revenues of the first quarter of the current fiscal were better than the last quarter of 2006-07!

What is not widely public is that the business has a high fixed cost but once that is covered, it recruits people to count the money. But that’s only between you and me.

2007 would be a year of small-caps and mid-caps

I feel the markets would trade flat for a couple of trading sessions. The Sensex is trading at a really high valuation of 23 – 24 times trailing twelve months earnings. The commensurate number, if one were to take estimated FY 2007 earnings, would be 18 to 19 times. Even this is quite on the higher side compared to the earnings multiple of other emerging markets. I would say the year 2007 would be the year for mid caps and small caps. But when I say that, one should be extremely selective when picking up stocks in these segments. I see some IT mid caps making for good buys at their current price levels and valuations.

Cement and metal stocks have seen technical correction in the past couple of sessions. Cement stocks would certainly strike back considering that the Q3 results that are to come out would be exceptionally good. There was a 2% appreciation in cement prices during the quarter gone by and this would be reflected in their quarterly numbers. A further Rs.3 to Rs.5 hike in cement prices is expected. There is no doubt that cement would continue to do well. I however wouldn’t hold the same for metal stocks. There has been a sharp correction in individual metal prices, say zinc, copper, lead etc. Copper for instance is trading at 8 month low. The sector I feel will take some time to recover.

I would suggest that investors be very selective in stock picking. We would see substantial growth now only in 8 to 10 percent of the companies listed on the bourses. The growth otherwise across the board would be nominal and in line of standard market returns.

- Nehal Shah, Research Analyst, Ventura Securities

Small-Caps, Mid-Caps mauled

A number of small-cap and mid-cap shares declined sharply in sync with a broad market fall.

Some major losers in the small-cap and mid-cap space, were ABG Heavy Industries (down 11% to Rs 210), GMR Industries (down 10% to Rs 322), SSI (down 10% to Rs 148), Flex Industries (down 10% to Rs 96.15), Tricom India (down 10% to Rs 107.60), Saurashtra Cement (down 10% to Rs 63.10), Rane Madras (down 10% to Rs 100), Vivimed Labs (down 9% to Rs 152), Alchemist (down 9% to Rs 30.85), Gemini Communications (down 9% to Rs 260), Mangalam Cement (down 9% to Rs 179), Polaris Software (down 11% to Rs 133), Escorts (down 11% to Rs 100), NDTV (down 10% to Rs 195), Shoppers’ Stop (down 10% to Rs 630), Bombay Rayon (down 10% to Rs 207), SRF (down 9% to Rs 176), IndusInd Bank (down 10% to Rs 39.70) and India Cements (down 8% to Rs 196).

A lower-than-expected industrial output growth for October 2006 accentuated the fall on the bourses, after the Sensex had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of interest rate rise. Sensex’s provisional closing today was 13,007.71, a fall of 391.72 points.

Since late-November 2006, selective recovery was witnessed in small-cap and mid-cap stocks. The BSE Mid-Cap Index had recovered to 5,829.47 by 5 December from 5,454.43 on 20 November. Although the BSE Mid-Cap index had surged since late-November, it had failed to breach the record closing of 6,033.30 of 10 May 2006.

BSE Small-Cap Index had surged to 6,799.99 on 5 December from 6,298.49 of 20 November. It is still sharply off its record closing of 7,812.84 of 10 May 2006.

The market-breadth was quite weak. For 2,124 shares that declined on BSE, 442 rose. As many as 46 shares were unchanged. Losers outpaced gainers by a ratio of 4.8:1.

Focus shifts to small-cap, mid-cap shares

Small-cap and mid-cap stocks came to the fore today as investors rotated money from frontline shares. The valuations of small-cap and mid-cap shares have turned attractive vis-a-vis frontline stocks following a surge some of the frontline stocks in the past few months.

BSE Small-Cap Index rose 103.62 points or 1.5% today to settle at 6,635.01 and BSE Mid-Cap Index advanced 76.64 points or 1.3% to 5,727.85. In comparison, Sensex rose a muted 14.78 points or 0.1% to settle at 13,616.73. The S&P CNX Nifty rose 6.45 points or 0.16% to settle at 3,928.20.

Volatility was high. After surging over 100 points at the onset of trading tracking firm Asian markets, Sensex gradually pared gains later and it even slipped into the red at one point of time at the fag end of the trading session. It recovered from the red and moved into the green again at close.

Sensex hit a low of 13,586.04 and high of 13,711.76.

Liquidation of positions in the November 2006 derivatives contracts ahead of expiry of November contracts on Thursday weighed on the bourses today. Five Sensex heavyweights Infosys, ICICI Bank, ONGC, Bharti Airtel and Reliance Industries (RIL) slipped into the red. These five stocks have a combined weightage of over 40% in Sensex.

Asian and European markets were firm today. Japan’s Nikkei 225 average jumped 221 points or 1.3% to 16,076.20 following robust industrial output data.

The market sentiment remains bullish due to strong FII inflow and expectations that corporate earnings growth will remain strong. Sensex has risen sharply over the past few weeks. The barometer index is up almost 45% in calendar 2006 so far.

Market would keenly watch the extent of rollover to December contracts from November 2006 contracts which expire on Thursday 30 November. A large rollover would mean traders expect the rally on continue whereas lower rollover would indicate correction might be on the cards.

The broad market depicted bullish trend today as gainers outpaced losers by a ratio of 1.77:1 on BSE. Select side counters surged.

BSE clocked a turnover of Rs 4388 crore compared to Tuesday’s Rs 4161 crore.

Cement shares extended their recent upmove on firm cement prices. ACC gained 3.6% to Rs 1140, Gujarat Ambuja Cements rose 2.3% to Rs 146.55 and Grasim gained 2% to Rs 2770.

Cigarette major ITC advanced 2.5% to Rs 184.40. 9.3 lakh shares changed hands in the counter on BSE.

Auto shares rose after the government today announced a cut of Rs 2 per litre in price of petrol and rupee one per litre in diesel. Bajaj Auto rose 1.1% to Rs 2670, Tata Motors gained 0.8% to Rs 817 and car major Maruti Udyog added 0.6% to Rs 920.

Refinery shares slipped on worries that cut in retail fuel prices would put further pressure on their marketing margins. HPCL shed 3.5% to Rs 291.50 and BPCL lost 1.7% to Rs 354.

Indian Oil Corporation dropped 4.7% to Rs 459.90 and Bongaigaon Refinery shed 5.5% to Rs 50.65. Indian Oil Corporation (IOC) today recommended a swap ratio of four IOC shares for every 37 shares held in Bongaigaon Refinery, for merger of Bongaigaon Refinery in IOC.

Oil exploration major ONCG dropped 0.8% to Rs 859.80. ONGC has to sell crude at a discount to state-run refiners to help them reduce losses incurred due to state-set prices.

Bharti Airtel dropped 1.3% to Rs 620 on profit taking. Communist Party of India said on Tuesday it was against the entry of Wal-Mart Stores Inc. in India, a day after Bharti Enterprises – a Bharti Airtel group company announced a tie-up with the world's biggest retailer on Tuesday.

ICICI Bank shed 0.8% to Rs 855 and Reliance Industries dropped 0.1% to Rs 1249.

Software major Infosys shed 0.7% to Rs 2151 in volatile trade. On Tuesday, Infosys ADR rose nearly 1%.

Tata Steel dropped 0.04% to Rs 475.60 in volatile trade after Anglo-Dutch steelmaker Corus Group said on Wednesday its third-quarter earnings rose 63% on the back of higher steel prices. Corus last month agreed a 4.3 billion-pound takeover offer from Tata Steel. However, Brazil's Companhia Siderurgica Nacional has since proposed making a higher bid and it has been conducting due diligence with the help of senior Corus management. Corus this week delayed a shareholder meeting to vote on Tata's takeover offer until Dec. 20.

Tyre shares extended their recent rally as natural rubber prices remained low. JK Industries gained nearly 5% to Rs 141.90, CEAT rose 4.4% to Rs 131.75, Apollo Tyres rose 4% to Rs 357 and MRF rose 2.7% to Rs 4612.

Shriram Transport Finance jumped 6% to Rs 140. The company today reported 11.4% growth in net profit for Q2 September 2006 to Rs 39.49 crore (Rs 35.44 crore). Total income rose 37.8% to Rs 318.21 crore (Rs 230.76 crore).

Recently listed Lanco Infratech jumped 14% to Rs 267. The scrip rose on huge volume of 1.1 crore shares on BSE.

Torrent Power jumped 20% to Rs 84.80. Volumes in the stock were a huge 70.9 lakh shares on BSE. Torrent Power is the umbrella company of the newly amalgamated generation, transmission and distribution businesses of the Torrent Group. It debut on the bourses was listed on the bourses on Tuesday (28 November).

Distillation equipment maker Praj Industries gained 4% to Rs 195.20 after the company said on Wednesday it had secured an order worth 2 million euros to design a bio-ethanol complex in Belgium

Bilpower rose 0.2% to Rs 154.15 after the company said on Wednesday it bought 30,999 shares of Tarapur Transformers for Rs 3.41 crore. The firm has also funded Tarapur to the tune of Rs 4.95 crore

Jindal Saw jumped 6% to Rs 404.90 on strong Q4 results. Jindal Saw reported a surge in net profit for Q4 September 2006 to Rs 47.56 crore from Rs 24.13 crore in Q4 September 2005. Net sales rose 98.9% to Rs 1123.39 crore from Rs 564.71 crore.

Voltas gained 2.4% to Rs 110. 21.3 lakh shares changed hands in the counter on BSE.

GE Shipping lost 5% to Rs 213. The stock was relisted on Monday following a scheme of arrangement whereby it transferred its offshore services division to a separate company Great Offshore which would be listed separately.

Gujarat NRE Coke rose 20% to Rs 32.25 after the company said the shareholders of Zelos Resources which is listed in the Australian stock exchange last week passed a resolution giving effect to the company taking a controlling 85% stake in the Australian resources firm. Zelos Resources is now being renamed Gujarat NRE Resources NL.

BPO firm Tricom India rose 10% to Rs 123.60. On Monday, the company announced that it plans to put up a new centre at Nashik with a recruitment of 400 freshers to its fold.

NDTV lost 1.3% to Rs 229.75 after the company said it has entered into a strategic alliance with Karan Johar and Dharma Productions for its entertainment business

Torrent Pharma rose 3.6% to Rs 197. Dr. Reddy's Laboratories said on Wednesday it had signed a deal with Torrent Pharmaceuticals to sell the latter's anti-cholesterol products, Listril and Listril Plus, in Russia.

Kamat Hotels India rose 0.7% to Rs 170.45. The company said on Tuesday that Kotak Securities under its portfolio management schemes, raised its stake in the company to 5.09 percent. The schemes of Kotak Securities acquired 47,648 shares, or a 0.36 percent stake, on Nov. 24, the company said.

Gitanjali Gems rose 10% to Rs 239.90 on reports is in talks to acquire U.S. jewellery retailer Samuels Jewelers Inc. in a transaction valued at $25 million.