Sensex Opens Flat; Biocon Rallies 10%

Mon, 4 Dec 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.12% while the Hang Seng is down 0.55%. The Nikkei 225 is trading down by 0.2%. Meanwhile, Wall Street fell on Friday, whipsawed by developments with a probe into Russia's alleged involvement in the US election as well as with progress on a tax bill in Congress.

Back home, India share markets have opened the day on a flattish note. The BSE Sensex is trading higher by 35 points while the NSE Nifty is trading higher by 4 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.4%.

Sectoral indices have opened the day on a mixed note with automobiles sector and information technology sector witnessing maximum buying interest. While, capital goods sector and energy sector opened the day in red. The rupee is trading at 64.43 to the US$.

Wipro share price fell over 2.3% after it was reported that the company would "vigorously" contest a US$140 million lawsuit filed by National Grid US over the implementation of an enterprise resource planning project which started in 2009.

While, IT major Infosys share price surged 1.7% after Salil Parekh was announced as the new CEO and MD of Infosys with effect from 2 January 2018, for a period of five years. Interim CEO, Pravin Rao, will be re-designated as the COO of the company for the next five years.

Pharma stocks opened the day on a mixed note with Biocon and Dr. Reddy's Lab leading the gains. As per an article in The Economic Times, India's healthcare market may see threefold jump in value terms to US$ 372 billion by 2022, driven by growing incidence of lifestyle diseases and rising demand for affordable healthcare delivery systems.

Reportedly, the value of the sector in 2016 stood at US$ 110 billon and will see a compounded annual growth rate (CAGR) of 22%.

Besides, the medical devices market in India, which was valued at US$ 4 billion as of 2016, is likely to cross US$ 11 billion mark by 2022 on the back of growing elderly population, uptick in medical tourism and gradual decline in cost of medical services.

With regard to impact of GST on the pharmaceutical sector, the report said GST will streamline taxation structure as also lead to ease of doing business by minimising cascading effect of many taxes applied to a product, rationalise supply chain, enable flow of seamless tax credit, lower manufacturing cost and cost of technology and make healthcare affordable.

Further, increasing expenditure on research and development (R&D), rising collaborations between Indian and foreign companies, reduction in product approval time and other such factors will keep driving the growth of Indian pharmaceutical market going forward.

Here's what Sarvajeet Bodas, our Research analyst wrote about the sector in the recent edition of The 5 Minute WrapUp:

• "While short-term pain is expected, companies with strong R&D capabilities and compliant plants will do well over the long term. The uncertainties make it important to be stock specific in the sector. It is important to look for companies that have the competence and staying power to overcome the challenges."

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Meanwhile, rallied over 10.5% in the opening trade on the reports that USFDA approved Mylan and Biocon's Ogivri the First Biosimilar for Trastuzumab, for the Treatment of HER2-Positive Breast and Gastric Cancers.

Moving on to the news from the economy. In the latest development, foreign investors pumped over Rs 197 billion into the country's stock markets in November, the highest in eight months.

The inflow came mainly on the back of government's plan to recapitalise PSU banks and the surge in India's ranking in the World Bank's ease of doing business.

In addition, such investors put in Rs 5.3 billion in the debt markets during the period under review.

According to depositories data, foreign portfolio investors (FPIs) invested a net amount of Rs 197.3 billion in equities last month. This is the highest net investment by FPIs since March, when they had poured in Rs. 309.1 billion in the equity market.

It has been a tremendous journey for the Indian equity markets in 2017. After taking a break from buying into Indian equities in August and September, FPIs bought equities in abundance in November.

Reportedly, bank's recapitalisation plan and world bank's ranking and positive developments in recent times provided a much-needed breather to FPIs who were concerned about the short-term impact of demonetisation and goods and services tax (GST) on the domestic economy and sluggish pace of economic recovery.

Yet another positive piece of news has come from Moody's Investor Services, which upgraded its India rating by a notch to 'Baa2' from 'Baa3' with a stable outlook, citing improved economic growth prospects driven by government reforms.

Overall, FPIs have invested Rs 538 billion in equities so far in 2017 and another Rs 1.46 trillion in debt markets.

Meanwhile, FY17 saw the highest inflows of foreign Direct Investments (FDI) in India at US $60 billion in the past four years. It will be crucial for the country going forward to maintain this momentum of inflows to help drive the economic development of the Indian economy.

Rising Foreign Direct Investments Augurs Well for India

While valuation has reached dizzy heights, earnings are yet to catch up. Fund managers believe there are some underlying risks that the Indian market is not factoring in like sluggish earnings growth. PE multiple expansion rather than earnings growth explains nearly all of the performance this year for India.

So, should you stay away from the market? Or swim with the tide?

Here's an excerpt of what Rahul Shah, Co-head of Research, wrote in one of the edition of The 5Minute WrapUp:

• "Indian retail investors should not blindly follow FPIs in and out of stocks. It is far better to take advantage of the volatility caused by their selling to enter good quality stocks for the long-term."

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