Sensex Opens in Green; IT & Healthcare Stocks Gain

Wed, 17 Jan 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 0.16% while the Hang Seng is down 0.49%. The Nikkei 225 is trading down by 0.43%. Meanwhile, Wall Street paused its rally on Tuesday, weighed down by weakness in General Electric shares and as lower oil prices dragged down the energy sector.

Back home, India share markets opened the day on a positive note. The BSE Sensex is trading higher by 92 points while the NSE Nifty is trading higher by 12 points. The BSE Mid Cap index and BSE Small Cap index opened the day down by 0.2% & 0.4% respectively.

Sectoral indices have opened the day on a mixed note with information technology stocks and healthcare stocks witnessing maximum buying interest. While, metal stocks and consumer durables stocks have opened the day in red. The rupee is trading at 63.41 to the US$.

Pharma stocks have opened the day on a mixed note with J.B. Chemicals and IPCA Labs being the most active stocks in this space. As per an article in a leading financial daily, Sun Pharma has settled a patent litigation with Ironwood Pharmaceuticals Inc and Allergan plc in the US over a generic version of Linzess. It is a drug used to treat bowel problems.

Reportedly, the company's wholly-owned subsidiaries have reached an agreement with Ironwood Pharmaceuticals and Allergan to resolve the patent litigation regarding submission of an abbreviated new drug application (ANDA) for a generic version of Linzess in the US.

Under the terms of settlement, Ironwood and Allergan will grant Sun Pharma subsidiaries a license to market a generic version of Linzess in the US beginning 1 February 2031 subject to USFDA approval or earlier under certain circumstances.

As a result of the settlement, all Hatch-Waxman litigation between Sun Pharma and both the companies, regarding the Linzess patents, will be dismissed, the reports noted.

Patent infringement litigation initiated by the companies against other parties who have submitted ANDAs to the USFDA seeking approval to market generic versions of Linzess are pending in the US District Court for the District of Delaware, where the earliest scheduled trial date is 17 June 2019.

Further, Teva, Mylan, Sandoz and Aurobindo Pharma have also challenged the patents to make generic Linzess capsules, before the expiration of the drug's patents.

One must note that, innovators in the pharmaceutical industry make use of patents largely. They make heavy use of patents whenever they create a new drug. In one of the editions of The Equitymaster Digest, we have spoken everything that you need to know about patented drugs, its advantages and its implications. Here's a snippet:

• "That's how the innovators in the pharmaceutical industry work. They make heavy use of patents whenever they create a new drug. The patent allows them to recoup the high capital expenditure that goes into the research and development (R&D) of new drugs. Companies that have a patent on a particular product are immune from competition for the duration of the patent."

Notably, a number of patent infringement cases have been filed against leading Indian pharma companies and their counterparts in other countries over the last few years.

Sun Pharma share price opened the day up by 0.9%.

Moving on to the news from IPO space. Amber Enterprises India will open its Rs 6-billion initial public offering on 17 January, with a price band at Rs 855-859 per share.

Equity shares are proposed to be listed on the BSE and the NSE. The book running lead managers to the offer are Edelweiss Financial Services, IDFC Bank, SBI Capital Markets and BNP Paribas.

The issue will close on 19 January.

Amber Enterprises India Ltd, a manufacturer of air conditioners, on Tuesday raised around Rs 1,787.1 million by selling shares to institutional investors as part of its anchor book allocation, a day before its initial public offering (IPO) opens.

The company will utilize the proceeds from the fresh issue for repayment of debt.

Meanwhile, the IPO of IT firm Newgen Software Technologies was subscribed 19% on the first day of its listing on Tuesday.

The IPO, which aims to raise Rs 4.3 billion, received bids for 2.3 million shares against the total issue size of over 12.2 million scrips, registering a subscription of 19%.

Should you subscribe to the above IPOs? We have analyzed these IPOs and have released our analysis on the companies. You can access it here (subscription required).

Speaking of IPOs, the demand for IPO's has reached sky-high levels. Avenue Supermarts was seen as the first company last year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies, among others.

IPO Subscription Times (2017)

This euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

To know more, you can download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the ongoing IPO rush.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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