The Indian markets have started today's session on an extremely negative note. The benchmark indices opened way below the breakeven mark and have not shown any signs of an upward move since then. Other key Asian markets are trading in the red with Hong Kong (down 2.2%) leading the pack of losers. The US markets closed higher by 0.8% yesterday.
Currently in India, heavyweights from the BSE-Sensex are trading weak with construction and metal stocks bearing the brunt of selling activity. The BSE-Sensex is trading lower by around 125 points, while the NSE-Nifty is down by about 40 points. Selling interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.4% and 0.5% respectively. The rupee is trading at 46.40 to the US dollar.
Pharma stocks have opened the day on a weak note. Losers here include Wockhardt and Ranbaxy. As per a leading business daily, Dr. Reddy's is planning to shift about 25% of production of drugs from its German subsidiary Betapharm to India over the next six months. Most of contracts the group had bagged in Germany were being sourced from India. It may be noted that Dr. Reddy's had already shifted about 35% of the production to India. In our view, the move to shift more production to a low cost manufacturing destination like India will help the company remain competitive. Betapharm's intangible assets and goodwill have been written down due to the difficult economic prospects. Bulk of Betapharm's business comes from tenders floated by German insurance companies. However, this move will also entail trimming down the workforce in Germany.
Steel stocks have opened the day on a negative note. Losers here include JSW Steel and SAIL. As per a leading business daily, Tata Steel's Teesside plant is likely to be bought by a consortium. Tata Steel Europe was about to mothball the cast products plant in North East England. The company has been incurring huge losses as it has no buyers of its production. In April 2009, a 10-year purchase agreement was prematurely terminated by the buyers. In a recent analyst meet, Tata Steel mentioned that were mothballing the plant instead of shutting it down. However, Tata Steel Europe will continue to employ almost 2,500 people in the region. Given the tough economic conditions in the area, the loss of jobs has become a politically sensitive issue for the local government.