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Down but not out!
Tue, 9 Mar Closing

A fresh round of profit booking towards the fag end of the day led to the benchmark indices once again slipping into the red and eventually ending the day below the dotted line. Thus, while Sensex closed with a decline of around 50 points (down 0.3%), NSE Nifty edged lower by around 20 points (down 0.4%). Declines in BSE Midcap and Small cap indices were slightly higher, with both indices losing in the range of 0.7%. On the Sensex, two stocks fell for every one that closed higher.

While Asian indices closed mixed today, Europe was seen trading largely negative today. The rupee was seen trading Rs 45.5 to the dollar at the time of writing.

This is the second time post the budget announcement that the markets have closed lower for the day. However, on both the occasions, the declines have been pretty modest, indicating that the investor fatigue has still not set in. Furthermore, with any major negative news flow not emanating from the developed markets either, the indices have had hardly any reasons to drop significantly lower from the current levels. Going forward, the direction of the Indian markets is likely to be determined by international events as until the month of April, when the steady stream of results will start flowing, there is hardly any important event that the markets should look forward to. Unless of course, RBI springs a surprise or two. However, with food prices showing signs of cooling off, even the RBI may want to maintain the status quo. For a long term investor though, every correction of the magnitude of 10%-15% should be an opportunity to add to his portfolio and set himself up nicely for the long term India growth story.

With a gain of 1%, Sun Pharma, the homegrown pharma major emerged amongst the top performers on the Sensex today. The buoyancy towards the counter seemed a result of the news that Caraco, its US based 76% subsidiary has got a reprieve from one of its bankers. RBS Citizens, Caraco’s banker has agreed to suspend the conditions on a term loan of US$ 18 m. Besides, a line of credit worth US$ 15 m will also not be affected. This could come as a welcome move to Caraco and eventually, to Sun Pharma as this is likely to give some more time to the troubled pharma maker to recover from a slump in business. It should be noted that the US FDA had asked Caraco to shut down its facilities in the US as it was found to be violating FDA manufacturing norms. The company was running solely on the basis of marketing Sun Pharma’s products in the US and had posted a loss during the most recent quarter. Hopefully, things should start looking up after a couple of quarters.

The entire sugar pack closed weak today with leading players like EID Parry, Bajaj Hindusthan and Balrampur Chini down anywhere between 1% and 3%. The weakness appeared a consequence of a reports floating around that sugar prices could easily come down by 2-3 rupees across India over the next few weeks. The report further added that irrespective of the type of sugar processed and the cost of production, there is still scope for further drop in sugar prices. It is worth mentioning that most sugar players in the country have seen their stock prices surge anywhere between 3 to 5 times over the last one year on the back of record high sugar prices. Now, with the tide of this extremely cyclical industry turning for the worse for producers, it is getting reflected in the stock prices as well.

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Feb 22, 2018 09:21 AM