BSE Smallcap index nears record high; HEG, KPIT zoom 20% each

Shares of smallcap companies were in focus on Wednesday with the S&P BSE SmallCap index up more than 1 per cent, was close to its record high level after a strong rally in chemicals, graphite electrode makers and rating agencies' shares.

Shares of HEG and KPIT Technologies, for instance, soared 20 per cent each on the BSE in the intra-day trade on Wednesday. Graphite India, Vimta Labs, Sandur Manganese & Iron Ore, CARE Ratings, Vinati Organics and Shree Pushkar Chemicals & Fertilisers, meanwhile, rallied between 10 per cent and 17 per cent in the intra-day trade.

At 02:45, the S&P BSE Smallcap index, the top gainer among broader indices, was up 1.3 per cent at 21,285 points, as compared to a 0.85 per cent gain in the S&P BSE Midcap and a 0.94 per cent rise in the S&P BSE Sensex. The smallcap index hit an intra-day high of 21,299.84 points, and is 120 points away from its record high level of 21,419.84 touched on March 12, 2021.

Shares of graphite electrode makers – HEG (locked in upper circuit of 20 per cent at Rs 2,189.70) and Graphite India (up 17 per cent at Rs 689.70) -- continued their northward movement in Wednesday's session on strong growth outlook as the pick-up in steel production globally is expected to drive demand for electrodes in near-term.

In the past three months, HEG (up 126 per cent) and Graphite India (up 117 per cent) have outperformed the market by surging more than 100 per cent as analysts estimated the demand to revive, aided by higher steel production and reduced inventory levels. The Chinese economy has seen a sustained and robust rebound from the pandemic-driven slump.

"The increase in steel production and normalisation of electrode inventory levels have resulted in an increase of electrodes demand thus increasing our capacity utilisation levels. We expect electrode prices to start firming up from next quarter," the management of HEG said.

According to Graphite India management, the steel industry production growth trend is expected to continue with the strong recovery in the major steel-consuming industries. The domestic steel industry is also poised to grow with the recent announcement of increased government spending on Indian infrastructure, it added.

That apart, shares of KPIT Technologies today zoomed 20 per cent to hit a new high of Rs 207.30 on the BSE in intra-day trade on the back of heavy volumes. The trading volumes on the counter more-than-doubled with a combined 6.6 million equity shares, representing 2.4 per cent of the company's total equity, having changed hands on the NSE and BSE, till 02:58 pm.

In the October-December quarter (Q3FY21), KPIT reported 6.7 per cent sequential growth in revenues in dollar terms and 6.5 per cent in constant currency (CC) terms. Net profit jumped 49.8 per cent to Rs 41.8 crore from Rs 27.9 crore in the previous quarter. Operating margin (EBITDA) expanded 140 basis points (bps) at 15.7 per cent as compared to 14.3 per cent last quarter. The company said revenue growth was led by electric powertrain and Europe geography. Execution started on the large deals won in earlier quarters. Profit growth led by higher operating margins, lower depreciation and higher yields on cash, it said.

The company’s management is confident of continuing with the growth and margin improvement momentum going into the next quarter. The automotive and mobility industry is prioritizing investments in new age technologies and the company is at the forefront of technology in these areas, it said.