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Sensex Trades in the Red; Metal Stocks Witness Selling
Thu, 19 Jan 01:30 pm

After opening the day on a flat note, the Indian share markets have continued to trade on a dull note and are trading marginally above the dotted line. Sectoral indices are trading on a mixed note with stocks in the consumer durables sector and the oil & gas sector maximum buying interest. Metal stocks are trading in the red.

The BSE Sensex is trading up 52 points (up 0.2%) and the NSE Nifty is trading up 11 points (up 0.1%). Meanwhile, both the BSE Mid Cap index and the BSE Small Cap index are trading up by 0.4%. The rupee is trading at 68.22 to the US$.

Stocks of pharma firm Cadila Healthcare were in focus today, as the company announced that it has received approval from the US health regulator - The US Food and Drug Administration (FDA) to market methotrexate tablets, a chemotherapy drug, in the American market.

This would enable the company to sell the drug in the US market.

Methotrexate tablets USP. 2.5 mg, is a chemotherapy drug used for leukemias, lymphnomas, breast cancer, lung cancer, head and neck cancers and other cancers. The drug will be produced at group's formulations manufacturing facility at the pharma special economic zone in Ahmedabad.

The Gujarat-based group now has more than 105 approvals and has so far filed nearly 275 abbreviated new drug applications (ANDAs) since 2003-04.

At the time of writing shares of Cadila Healthcare were trading up by 1.3%.

Meanwhile, shares of Cipla were trading down by 0.7% after the company announced that its wholly-owned subsidiary Goldencross Pharma has entered in to an agreement to sell its 100% equity stake in Four M Propack, India to Shriji Polymers.

The sale is said to be for a consideration of Rs 135 million and an additional sum derived on the basis of the value of mutual funds, cash and bank balance, tax refunds, etc. at the time of closing estimated at around Rs 57 million.

Four M Propack is the pharma plastic packaging company that exports its products to Europe and USA.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years. The sector has faced great volatility over the years.

Volatility in the Pharma Sector
Volatility in the Pharma Sector

Bhavita Nagrani, our pharma sector analyst has explained the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration (FDA) has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

Give it a read to form a better understanding of the current scenario in the Indian pharma sector.

Moving on to news from the manufacturing sector. The government has approved the modified version of a key scheme that incentivizes electronics manufacturing in the country. The cabinet approved the Modified Special Incentive Package Scheme (M-SIPS) to boost electronic manufacturing.

Under the amended rules, companies that invest in manufacturing would get up to Rs 10,000 crore as incentives. New investment proposals would be accepted till December 31, 2018, the government said in a statement.

In the case of a single investment in excess of Rs 6,850 crore ($1 billion), a separate committee headed by the cabinet secretary would approve the proposal. M-SIPS provides a subsidy for capital expenditure - 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs.

The time frame for the incentives has also been fixed as five years (down from ten years) which means that incentives will be available for investments made within five years from the date of approval.

To ensure time-bound delivery, now eligible proposals will be approved within 120 days of their complete submission. The units receiving incentives under the scheme will have to provide an undertaking to remain in commercial production for at least 3 years.

So far, 243 applications have been received under M-SIPS, out of which 75 applications have been approved by the Ministry of Electronics and Information Technology, involving investment proposals of Rs 18 billion, since its inception in July 2016.

The amended M-SIPS is a welcome step towards boosting local electronic manufacturing and would discourage the import the components of parts required for mobile handsets.

Import of electronic goods puts pressure on India's current account, which runs into deficit every year, as it continues to import 65% of its total consumption.

Local manufacturing will be even more crucial in the coming days as the market for electronics hardware in India is projected to increase to US$ 400 billion by 2020.

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