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Sensex Trades in Green; Metal Stocks Top Losers
Wed, 21 Feb 01:30 pm

After opening the day in green share markets in India  witnessed choppy trading activity and are presently trading marginally above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the IT sector and stocks in the FMCG sector witnessing maximum buying interest. While stocks in the metal sector are leading the losses.

The BSE Sensex is trading up by 85 points (up 0.3%) and the NSE Nifty is trading up by 14 points (up 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.4%, while the BSE Small Cap index is trading down by 0.3%. The rupee is trading at 64.82 to the US$.

In news from stocks in the pharma sector. Biocon share price is in focus today after the drug major said that the United States Food & Drug Administration (USFDA) made six observations after inspecting its Malaysia plant.

Biocon said that the USFDA completed a pre-approval inspection of the facility and issued a Form 483 with six observations.

As per USFDA, observations are made in Form 483 when investigators feel that conditions or practices in the facility are such that products may become adulterated or render injuries to health.

At the time of writing, Biocon share price was trading down by 1.7%

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

However, note that USFDA alerts on Indian pharma companies have increased over the past few years. Regulators used to visit the plants every two years. Now they come every eight months. Increasing inspections have led to a total of 41 import alerts in the past eight years - 33 of them (80%) in just the last four years (2013-16). This clearly signifies increased USFDA scrutiny on Indian pharma firms. If that wasn't enough, increasing pricing pressure in the generics segment has dented realisations.

However, the recent development of USFDA expediting the drug approval process can bring some respite for Indian pharma companies. This comes as drug approvals for Indian companies have gone up 50% in the period from January to June 2017 compared to the same period last year, as can be seen from the chart below:

Expediting Drug Approval Process to be a Positive for Industry

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.

Coal India share price is among the most active stocks on the bourses today after a major policy decision by the government.

Ending the four-decade monopoly of state owned - Coal India Ltd, the government announced a decision to open up the coal sector to commercial mining by the private sector.

The Cabinet Committee on Economic Affairs approved the methodology for auction of coal mines for sale of coal, the most ambitious coal sector reform since its nationalisation in 1973.

Coal India Ltd, along with its subsidiaries is the only firm currently allowed to mine and sell coal. The rules, however, permit power, steel, cement and aluminium companies to produce for their own captive use.

The opening up of the sector is expected to usher in competition in coal supply, reduce coal imports and help stressed power plants to attempt a turnaround through better fuel management.

It comes at a time when 46 major thermal stations are facing "critical" stocks of less than seven days, as per official data for February 19.

Apart from opening up the sector to domestic players, this move could also see interest from multinational miners.

The move is expected to increase efficiency in the coal sector by moving from an era of monopoly to competition.

The new methodology proposed to be adapted gives highest priority to transparency, ease of doing business and ensuring that natural resources are used for national development.

Coal India Limited currently accounts for over 80% of domestic coal output. It will be interesting to see if the coal major is able to keep up with the competition.

At the time of writing, Coal India share price was trading flat.

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