Small cap, mid cap stocks shine as Sebi relaxes norms for trading in illiquid stocks
Dec 23, 2013
Source : The Times of India

 

MUMBAI: A bout of volatility was witnessed as key benchmark indices recovered from lower level after trimming initial gains in morning trade. The market breadth, indicating the overall health of the market, was strong. The market sentiment was boosted by data showing that foreign funds remained buyers of Indian stocks on Friday, 20 December 2013. The barometer index, the S&P BSE Sensex, was up 86.68 points or 0.41%, off close to 40 points from the day's high and up about 85 points from the day's low. Gains in Asian stocks also boosted sentiment on the domestic bourses.

Shares of a number of small-cap and mid-cap companies rose for the second day in a row, boosted by stock market regulator Securities and Exchange Board of India's (Sebi) announcement on 19 December 2013 that it has decided to rationalize the rules on trading of thinly-traded stocks. BSE Small-Cap and Mid-Cap indices were up more than 1% each, with both these indices outperforming the Sensex.

Asian stocks edged higher on Monday, 23 December 2013, after data showed faster-than-estimated economic growth in the US and after the International Monetary Fund said it's raising its outlook for the world's largest economy.

Hindalco Industries extended initial gains. Capital goods stocks rose. L&T gained after the company said it is in discussions with a large global institutional investor for a proposed acquisition of a stake in L&T's subsidiary viz. L&T Infrastructure Development Projects. Realty stocks extended Friday's gains as ICICI Bank joined State Bank of India and HDFC by cutting interest on home loans. Among IT stocks, HCL Technologies hit record high and Wipro scaled 52-week high.

The market edged higher in early trade on firm Asian stocks. The S&P BSE Sensex and the 50-unit CNX Nifty, both, hit their highest level in almost two weeks. A bout of volatility was witnessed as key benchmark indices recovered from lower level after trimming initial gains in morning trade.

The market sentiment was boosted by data showing that foreign funds remained buyers of Indian stocks on Friday, 20 December 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 990.19 crore on Friday, 20 December 2013, as per provisional data from the stock exchanges.

The market may remain volatile this week, which is a truncated trading week, as traders roll over positions in the futures & options (F&O) segment from the near month December 2013 series to January 2014 series. The near month December 2013 derivatives contract expire on Thursday, 26 December 2013. The stock market remains closed on Wednesday, 25 December 2013, on account of Christmas.

At 10:20 IST, the S&P BSE Sensex was up 86.68 points or 0.41% to 21,166.60. The index jumped 128.17 points at the day's high of 21,207.89 in early trade, its highest level since 11 December 2013. The index rose 0.82 points at the day's low of 21,080.54 in opening trade.

The CNX Nifty was up 28.40 points or 0.45% to 6,302.65. The index hit a high of 6,310.25 in intraday trade, its highest level since 11 December 2013. The index hit a low of 6,266.95 in intraday trade.

The S&P BSE Mid-Cap index was up 77.20 points or 1.19% at 6,579.69. The BSE Small-Cap index was up 67.37 points or 1.07% at 6,359.33. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,243 shares gained and 519 shares fell. A total of 96 shares were unchanged.

Among the 30-share Sensex pack, 26 stocks gained and rest of them declined. Jindal Steel & Power (up 2.99%), Tata Steel (up 1.72%) and Hero MotoCorp (up 1.57%) gained.

Hindalco Industries rose 3.82%, with the stock extending initial gains.

Realty stocks extended Friday's gains as ICICI Bank joined State Bank of India and HDFC by cutting interest on home loans. The reduction in home loan rates by these three major lenders could lead to a revival of interest in the real estate sector, which has been hit by high prices amid a sluggish economy. Purchases of both residential and commercial property are largely driven by finance. DLF (up 2.43%), HDIL (up 2.75%), Unitech (up 0.33%) D B Realty (up 0.75%), and Sobha Developers (up 0.84%) gained.

ICICI Bank on Saturday, 21 December 2013, said it has cut its home loan rates for new customers by 15 basis points or 0.15 percentage points, as a part of a special scheme. It will be valid till 31 January 2014. Under the scheme, the bank will offer home loans up to Rs. 75 lakh at an interest rate of 10.25%, while loans above Rs. 75 lakh will be charged 10.50%. The move came shortly after State Bank of India and Housing Development Finance Corporation (HDFC) reducing home loan rates on 19 December 2013.

Shares of ICICI Bank gained 0.89%.

Capital goods stocks edged higher. Bhel (up 1%), BEML (up 0.98%), ABB (up 2.18%), Crompton Greaves (up 1.8%) and Siemens (up 1.39%) gained.

L&T gained 1.14% after the company said it is in discussions with a large global institutional investor for a proposed acquisition of a stake in L&T's subsidiary viz. L&T Infrastructure Development Projects. The announcement was made after market hours on Friday, 20 December 2013.

L&T Infrastructure Development Projects (L&TIDPL) has submitted an application to the Foreign Investment Promotion Board (FIPB) seeking approval in relation to a proposed foreign direct investment in L&T IDPL. Subject to completion of the due diligence processes and necessary agreement on governance and other terms of the transaction with the investor, there is a contemplation of an initial infusion of Rs 1000 crore into L&T IDPL, followed by a second tranche of Rs 1000 crore (or such higher amount as may be agreed between L&T and investor) after twelve months from the date of initial investment. The proposed transactions are subject to various factors, and may or may not be completed, and parties have not yet entered into any agreement, L&T said in a statement. In the meantime, shareholders and any other investors are reminded to exercise caution when dealing in the company's securities, pending definitive announcement(s) from the company, if any, L&T said.

L&T IDPL is primarily engaged in public-private partnership projects in India, with business interests spread across sectors involving roads and bridges, ports, metro rail, wind energy and power transmission lines. It has experience in identifying and assessing viability of projects, achieving financial closure, project management, operations and maintenance of infrastructure assets across various sectors as well as divestiture.

Wipro gained 0.5% to Rs 551.70. The stock hit 52-week high of Rs 557 in intraday trade.

HCL Technologies rose 1.03% to Rs 1,249.05. The stock hit record high of Rs 1,259.80 in intraday trade.

United Spirits lost 1.76% after a division bench of the Karnataka High Court on Friday, 20 December 2013, declared United Breweries (Holdings)' stake sale in United Spirits to UK-based spirits giant Diageo null and void. A division bench of the Karnataka High Court on Friday, 20 December 2013, declared the United Breweries Holdings (UBHL)'s stake sale in United Spirits (USL) to UK-based spirits giant Diageo null and void. The court passed the ruling while admitting an appeal against the USL-Diageo deal by creditors of UBHL. The court said the deal is void until a conclusion is reached on the winding up petitions against UBHL.

The court also asked Diageo to return the shares bought from UBHL as the company is mired in a whirlpool of winding-up petitions by creditors, who are seeking recovery of unpaid dues of close to Rs 600 crore from Vijay Mallya's firm.

Last year, Diageo had announced that it would pick up 53.4% stake in USL in a multi-structured deal for a total of Rs 11,166.50 crore. As part of that deal, 26% shareholding was to be acquired through an open offer.

After Kingfisher Airlines defaulted on its loans, several creditors such as BNP Paribas had dragged UBHL, the corporate guarantor for the liabilities, to court and had filed a winding-up petition.

USL and Diageo said they would take steps to protect their interests after the Karnataka High Court declared as "null and void" the sale of shares of the Indian firm by its holding company to the UK-based giant. "We will take all necessary steps to protect Diageo's interests as well as our own," UB Group Chairman Vijay Mallya said.

Diageo said that only part of the 26% stake it now owns in United Spirits is affected by the court's decision. "We do not believe that there are any grounds for declaring the sale of the [6.9% of] shares in United Spirits purchased by Diageo on 4 July 2013 from United Breweries (Holdings) as void." the company said in a statement. "We are disappointed to hear that the court has overruled the previous order of the High Court of Karnataka," which approved the share sale, it said.

Sebi after trading on Thursday, 19 December 2013, said it has rationalized the periodic call auction mechanism by modifying how it classifies illiquid stocks. A stock would now be classified as illiquid if its average daily turnover is less than Rs 2 lakh in the previous two quarters and if it is classified as illiquid at all the exchanges where it is traded. Earlier, a stock was classified to be illiquid if its average daily trading volume in a quarter was less than 10,000, the average daily number of trades was less than 50 in a quarter and if it was classified as illiquid by all the exchanges where it traded.

Henceforth, call auctions will not apply to shares where a company is profitable in at least two of the past three years and not more than 20% of promoters' shareholding is pledged in the latest quarter and the book value is three times or more than the face value. The new rules also exclude companies with a market capitalisation of at least Rs 10 crore or which have paid a dividend in at least two of the past three years.

From now, stock exchanges will determine the number of call auction sessions for illiquid stocks. Exchanges will, however, have at least two sessions in a trading day, with one uniform closing session across the exchanges. So far, periodic call auction sessions of one hour each were conducted throughout trading hours, with the first session starting at 9:30 IST.

In foreign exchange market, rupee strengthened past 62 against the dollar. The partially convertible rupee was hovering at 61.945 compared to its close of 62.04/05 on Friday, 20 December 2013. The rupee rose on global risk on sentiment.

Asian stocks edged higher on Monday, 23 December 2013, after data showed faster-than-estimated economic growth in the US and after the International Monetary Fund said it's raising its outlook for the world's largest economy. Key benchmark indices in China, Hong Kong, Taiwan, Singapore and South Korea rose 0.35% to 0.7%. In Indonesia, Jakarta Composite was off 0.87%. Japanese markets were shut today for a holiday.

Trading in US index futures indicated that the Dow could advance 41 points at the opening bell on Monday, 23 December 2013. US stocks rallied Friday, lifting the Dow Jones Industrial Average and the S&P 500 to record levels, after a government report showed the economy grew at its fastest pace in two years last quarter.

The rate of US growth in the third quarter was faster than previously estimated as consumers stepped up spending on services such as health care and companies invested more in software. Gross domestic product climbed at a 4.1% annualized rate, the strongest since the final three months of 2011 and up from a previous estimate of 3.6%, Commerce Department figures showed on Friday, 20 December 2013.

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