Sensex Opens 120 Points Lower; Bank & Metal Stocks Lead the Losses

Wed, 7 Mar 09:30 am

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Asian stock markets are lower in morning trade following news that Gary Cohn would resign as President Donald Trump's top economic adviser after he lost a fight about tariffs. Cohn was one of several voices in the White House arguing against the planned tariffs on imports of steel and aluminum. The Nikkei 225 is off 0.19% while the Hang Seng is down 0.18%. The Shanghai Composite is trading up by 0.14%. Overnight, the US stocks closed slightly higher.

Meanwhile, Indian share markets too have opened the day in red. BSE-Sensex is trading lower by 120 points and NSE-Nifty is trading lower by 16 points. S&P BSE Mid Cap is trading lower by 0.3% and S&P BSE Small Cap is trading down by 0.4%.

Losses are largely seen in bank stocks, metal stocks and PSU stocks. The rupee is trading at Rs 64.99 against the US$.

The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it's relatively high.

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India's GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.

In news from pharma sector, as per an article in The Livemint, Torrent Pharmaceuticals Ltd is readying a €2 billion (Rs 160 billion) bid for Zentiva N.V., the generic drugs unit of France's Sanofi.

Torrent Pharma has reportedly tied up funding from several domestic and foreign banks for the bid, the deadline for which ends on 28 March.

If Torrent is successful, it will be the biggest outbound transaction by an Indian drug maker, the previous largest being Lupin Ltd's acquisition of Gavis Pharmaceuticals Llc. and Novel Laboratories Inc. for US$880 million in 2015.

Torrent has been fairly active in the M&A space in the recent past. In January, Torrent announced the acquisition of US-based generic pharmaceuticals company, Biopharm Inc (BPI) through its US subsidiary.

In November last year, it acquired the domestic business of Unichem Laboratories for close to Rs 36 billion. In 2014, Torrent acquired the branded domestic formulations business of Elder Pharma for Rs 20 billion and acquired select brands of Novartis, and manufacturing plants of Zyg Pharma and Glochem Industries in 2015.

Torrent Pharma share price opened the day down by 0.3% on the BSE.

Moving on to news from telecom sector. As per a leading financial daily, Bharti Airtel on Tuesday said it has acquired India leg of Gulf Bridge International submarine cable which will boost its data carrying capacity.

Airtel and GBI have also agreed to formulate joint 'Go to Market' strategies and leverage the footprint of their respective global networks to serve global customers.

This will also complement Airtel's existing global network spanning 2,50,000 Rkms (of networking cable) with presence in 50 countries.

With this new investment, Airtel has further consolidated its leading position as a global capacity provider. It now has large capacities, owned and leased, on multiple international submarine cable systems and offers the maximum number of routes between India and Europe.

Bharti Airtel share price opened the trading day down by 0.2% on the BSE.

In news from FMCG sector, as per a leading financial daily, ITC's Aashirvaad atta has become a Rs 40 billion brand in the wheat flour market, with around 28% share in the branded segment.

The company as part of its expansion plans is also expanding brand Aashirvaad into new segments as milk and ghee in the dairy category, besides spices, instant mixes, ready meals etc.

The company has extended Aashirwad brand into cow ghee and also launched Aashirwad milk last month in Munger at Bihar. The company is also evaluating some other segments like maida, suji, besan for expansion of Aashirwad brand.

ITC share price is trading down by 0.8%.

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