Mumbai: Over a dozen mid-cap stocks, set to join the elite-league of stocks in the futures and options (F&O) segment starting 6 September on the National Stock Exchange (NSE), soared between 3.6% and 15.6% on Friday.
Late Thursday, NSE named the 14 new stocks being added to the F&O segment through a press release issued on its website. Futures and options are stock derivatives or financial instruments that derive value from underlying price of a stock in the cash market.
The stocks include seven mid-sized technology companies: 3i Infotech Ltd, NIIT Technologies Ltd, Nucleus Software Exports, Tech Mahindra Ltd, Tulip IT Services Ltd, CMC Ltd and Sasken Communications Ltd.
Also in the list of additions are IT education provider Aptech Ltd, integrated biotechnology firm Biocon Ltd and Yes Bank Ltd, the youngest Indian bank. The group is rounded off by manufacturing companies such as Havells India Ltd, Lakshmi Machines Ltd, Welspun Gujarat Stahl Rohren Ltd and Bhushan Steel & Strips Ltd.
Several research analysts and equity fund managers told Mint that they didn’t want to comment about the outlook for these stocks or discuss the rationale behind their inclusion in the F&O segment. As the head of research at one of the largest domestic brokerage noted on the condition he wouldn’t be identified: “Any comments on the future outlook of these stocks or their selection criteria could invite trouble from the NSE or the regulator.”
Bhushan Steel was the largest gainer among these stocks on Friday, spurting 15.6%. While Yes Bank, Havells India and NIIT Technologies added around 10% to their stock price, Tech Mahindra gained more than 8%. 3i Infotech and Sasken Communications gained about 7%, while Welspun and CMC added about 6% to Thursday’s price. Nucleus Software, up 3.6%, was at the bottom of this list.
Exposing these companies to the F&O segment will help create greater liquidity in the market, while also helping to boost investor confidence in these stocks, says Amar Chintopanth, chief financial officer of 3i Infotech. “Long-term investors will feel good to own a stock which is traded in multiple segments in the market. (From a company-perspective) we feel that our stock has attained a level of maturity in the market,” he added. 3i Infotech had given investor guidance to achieve over 60% revenue growth in financial year 2008, compared to its previous year.
A set of new stocks in the F&O segment is definitely positive news for the trading circuit and has, therefore, been well received, said Harshad Deshpande, who tracks technology sector for First Global Stockbroking Ltd. “All the seven IT stocks in this list are fundamentally strong, though a few that heavily depend on the financial services market in US could be affected if a slowdown occurs, in the aftermath of the mortgage crisis” he said.
Tech Mahindra is the only firm in this group that is capitalized at above Rs5,000 crore. The market cap (capitalization) of the company, formerly known as Mahindra British Telecom, is currently at more than Rs14,500 crore. Yes Bank, capitalized at about Rs4,700 crore, and Biocon, at about Rs4,330 crore, are the second- and third-largest firms in this group, on that basis. Sasken Communications, with a market cap of about Rs1,000 crore, is the smallest.
None of these 14 stocks appeared to have abnormal fluctuations ahead of the Thursday NSE news. Tulip IT Services had gained over 3% from Monday to Thursday and Welspun added about 2% in these four days. On the other hand, Nucleus Software and NIIT Technologies lost about 8% and 5%, respectively. Most other scrips had remained relatively flat.