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Sensex Finishes Marginally Lower; Banking Stocks Drag
Mon, 27 Feb Closing

Share markets in India finished the day marginally lower owing to weak global cues. At the closing bell, the BSE Sensex closed lower by 80 points, whereas the NSE Nifty finished lower by 43 points. The S&P BSE Midcap finished flat while the S&P BSE Small Cap ended up by 0.2%. Sectoral indices ended the day on a mixed note with automobile stocks and banking stocks leading the losses. Oil & gas and healthcare stocks were among the top gainers on the BSE.

Asian equity markets finished lower today with shares in Japan leading the losses. The Nikkei 225 was down 0.91% while China's Shanghai Composite is off 0.76% and Hong Kong's Hang Seng is lower by 0.17%. European stock markets are higher today with shares in London leading the region. The FTSE 100 is up 0.22%, the CAC 40 is flat, and and Germany's DAX is up 0.12%.

The rupee was trading at Rs 66.71 against the US$ in the afternoon session. Oil prices were trading at US$ 54.45 at the time of writing.

Power Grid Corporation was among the top losers on BSE (down 3%) as the company entered into a loan agreement with the Asian Development Bank (ADB) for US$ 500 million to part-fund its 'Green Energy Corridors'. The Green Energy Corridors would be a bipole link power transmission between the Western Region (Raigarh, Chhattisgarh) and the Southern Region (Pugalur, Tamil Nadu) to North Trichur (Kerala).

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As per the reports, US$ 500 million loan from ADB's ordinary capital resources make up about 19% of the total project cost, standing at US$ 2.581 billion, with Power Grid providing counterpart financing of US$ 2.081 billion.

Oil & Gas stocks ended the day on a mixed note with Reliance Industries and Petronet LNG being the most active stocks in this space. According to an article in The Economic Times, Oil and Natural Gas Corporation (ONGC) will take control of Hindustan Petroleum Corporation Ltd (HPCL) as part of the government's plan to create an integrated public sector oil entity.

The government will issue a proposal for approval by the country's cabinet to transfer its 51.11% of HPCL to ONGC. The stake is worth about US$ 4.4 billion. With this merger ONGC's exploration business will be integrated with HPCL's refining and retailing capacities.

The move will stop short of a complete merger but the purpose would be served with this step. Notably, HPCL would add 23.8 million tons of annual crude refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after Indian Oil Corp. and Reliance Industries Ltd.

In a premium edition of The 5 Minute WrapUp, Richa Agarwal has spoken about the advantages and the complexities related to the plan (Subscription Required) of creating an integrated public sector 'oil major'. Here's a snippet of what she wrote:

  • "On the positive side, the merged entity will be better placed to face the competition from the private players. It could improve financial muscle and risk taking ability when it comes to bidding for international projects and acquisitions."

Most importantly, we believe its success will depend on the kind of autonomy and operational freedom the merged entity is given.

ONGC share price & HPCL share price finished the day down by 0.6% & 2% respectively.

Moving on to the news from the pharma sector, the stock of Cadila Healthcare closed up 1.6% today after it was reported that Zydus Cadila's US subsidiary received approval from the US health regulator to market oseltamivir phosphate capsules used for the treatment of Tamiflu.

Nesher Pharmaceuticals, a subsidiary of Zydus Pharmaceuticals USA, was granted final approval from the United States Food and Drug Administration (USFDA) to market these capsules in strengths of 30 mg, 45 mg, and 75 mg.

As per IMS health December 2016 sales data, oseltamivir phosphate capsules had sales worth US$ 382 million. Notably, the company now has more than 110 approvals and has so far filed over 300 abbreviated new drug applications (ANDAs) since the commencement of the filing process in 2003-04 fiscal.

Despite the fact of being a late entrant, what is commendable is that the company has established itself very well over there. It is ranked amongst the top 10 generics companies in the US, based on prescriptions. The acquisition of Nesher's facility, was also intended to strengthen its focus on niche products (Subscription required).

United States: Cadila's Revenue Contributor

United States: Cadila's Revenue Contributor

One must note that, Cadila derives around 42% of its sales from the US market. In-spite of not being an early entrant, the company has been able to significantly improve its sales growth year after year in US. The compounded annual growth rate (CAGR) of sales in this geography over a period of four years has been a healthy 28%.

Meanwhile, Lupin Ltd announced that its Japanese subsidiary, Kyowa Pharmaceutical Industry Co., Ltd., and Astellas Pharma Inc., have entered into an agreement that provides Kyowa the exclusive right to distribute and promote extended-release tablets of quetiapine fumarate in Japan.

Reportedly, Astellas submitted a new drug application (NDA) with the Ministry of Health, Labour and Welfare in Japan for extended-release tablets for the indication of improvement of depressive symptoms associated with bipolar disorder. Based on the agreement, when Astellas obtains an approval for the NDA of these tablets, Kyowa will exclusively distribute and promote the products in Japan (Subscription Required).

And here's a note from Profit Hunter:

Power Grid Corporation was among the top losers of the Nifty 50 Index - down 3% for the day. In fact, the stock is down 6.34% in the last three days. Let's take a look at the chart.

Power Grid at Crucial Level
Power Grid at Crucial Level  

Power Grid started its uptrend from Rs 128 in December 2015 and topped out at Rs 209, gaining 64% in 14 months. Yesterday the stock broke down from a double-top pattern on the daily chart and the target of this pattern had already been achieved. The pattern was supported by healthy volumes and the RSI indicator showing negative divergence. We also observed an addition of 21% open interest in today's session. An increase in open interest along with a decrease in price does not bode well for the bulls.

But now the stock is trading close to its uptrend support line. This line has provided support various times in the past. The RSI is also trading at its support level.

Whether the recent decline in price is a minor correction in an uptrend or if the stock about to start a fresh downtrend - it will be fun to see how this plays out. Stay tuned.

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Nov 24, 2017 03:37 PM