The Hindu Business Line : Value-picking in mid-cap stocks

AFTER a prolonged dull phase, the market showed some traction on Thursday. The entry of CalPERS (the largest pension fund in the US) into the Indian stock markets had been a much-awaited event. The news that CalPERS prefers to invest in the Indian markets against China too brightened sentiment in stocks.

Monsoons too added flavour to the markets. Gujarat and Maharashtra have been receiving good rain enhancing the scope for a revival in the monsoons. This could have lifted the spirit of investors who had been waiting for some trigger for a pick up.

Among sectoral plays, entertainment and bank stocks were the favourites. Select mid-cap counters too were among the top gainers, rising in excess of 15 per cent.

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The Sensex gained 83.7 points crossing the 5,200-mark to close at 5,252.78 points. It moved up steadily through the day exhibiting buoyancy during the later half of the trading session. An 83-point rise has been the biggest upmove for the Sensex in more than a month.

The Nifty gained 1.75 per cent. After a brief lull on the day before, IT stocks staged a comeback.

The NSE IT index outperformed the Nifty by a huge margin. The index gained 2.7 per cent. Wipro was the biggest mover among the front line companies gaining six per cent.

HLL, which has been declining over the past few days recovered and gained more than 3 per cent. The top gainers in the Sensex stocks were Wipro (6 per cent), Hero Honda (4 per cent), BHEL (4 per cent) and ICICI Bank (2.9 per cent). CLSA, an FII broking firm put out a `buy' recommendation on Reliance Industries. This could have perked up interest in the stock. The stock gained two per cent to Rs 503.

Most of the fire was, however, in the mid-cap stocks. The mid-cap story has been attracting substantial interest over the past few days. Especially as there is no trigger for a broadbased rally, select mid-cap stocks that offer value are being picked up. These counters have been giving alarming returns to investors over the last two months. Some of the stocks that gained substantially during the last two months were Kirloskar Brothers, Kirloskar Oil Engines, Carborundum Universal, KPIT Cummins, Shanti Gears and Nagarjuna Construction.

Stocks that were on fire on Thursday were LG Balakrishna Brothers, SBI Home Finance, TVS Electronics, Jindal Strips and Crest Communications. These stocks gained in excess of 20 per cent and attracted more than usual volumes. Few other stocks that gained more than 15 per cent during the day were Everest Industries, Creative Eye, Bell Ceramics and Ennore Foundries.

Among sectoral plays, steel, sugar and entertainment stocks were on top of the buy list. Entertainments stocks such as Padmalaya Tele, Mukta Arts, ETC Networks, Tips Industries and Balaji Tele gained more than seven per cent.

Steel stocks continued to surge due to the price hike announced couple of days ago. Tata Steel and SAIL were among the most actively traded securities that rose. SAIL gained over 5 per cent to Rs 41.

Banking stocks staged a comeback after a long time. The BSE BANKEX rose 2.47 per cent, outperforming the broad market. Oriental Bank of Commerce, PNB and SBI were up.

Max India recovered after a sharp fall the day before. News reports suggesting that the open offer for Max India at Rs 200 per share might not come thorough as the allotment of stake to the FII will breach the prescribed foreign holding limits in sectors such as telecom and insurance, where Max has business interests, had lead to a selling spree the day before. The stock closed at Rs 170, up Rs 7 from the previous day's close of Rs 163.

Texmaco has received an order from NTPC for Rs 26 crore. The orders are for wagons meant for transportation of coal to thermal power plants. The news triggered a buying spree and trading in the counter froze due to high demand outstripped the supply of shares.

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