Inflation data disappoints markets

Tue, 12 Mar 01:30 pm

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Inspite of better IIP data at 2.4% Indian share market have witnessed a sharp fall and are trading in red. This seems to be largely attributable to disappointing consumer price inflation (CPI) number which was up at 10.9% from 10.8% in Feb 2013. Most sectors are trading in red barring the stocks from FMCG space.

BSE-Sensex is down by 97 points and NSE-Nifty is trading up by 35 points. While BSE Mid Cap is trading down by 0.66%, BSE Small Cap index is trading down by 0.50%. The rupee is trading at 54.31 to the US dollar.

Pharma stocks are trading in mixed, with Ranbaxy Pharma and Dishman Pharma are top gainers and Glenmark and Piramal enterprise leading among losers. As per the financial daily, the cost of imported insulin is expected to go up as the department of pharmaceuticals (DoP) has asked the National Pharmaceutical Pricing Authority (NPPA) to review Eli Lilly's imported insulin prices. The order states that NPPA must regulate prices within the scope of the Drugs Prices Control Order (DPCO), unless it is amended. The department has asked NPPA to revisit the prices fixed for Eli Lilly's five imported insulin products and bring these at par with other imported products. Reportedly, the order by DPCO was on the back of fresh guidelines issued by NPPA, for lowering the margin of pharma companies on imported drugs. While the DPCO provides for maximum allowable post manufacturing expenses (MAPE) not exceeding 50%, NPPA guidelines issued in 2011, changed the margin to 35%. The regulator has been particularly strict with insulin prices in India, this is because of the huge gap that exists between prices of indigenously manufactured insulin and imported ones.

The current insulin market in India is around Rs 11.4 bn. Major players includes various MNC companies likes of Novo Nordisk, Eli Lilly and Sanofi. These companies hold almost 86% of the total market. Among the domestic companies, Biocon takes approx 10%. The other companies viz Wockhardt, Lupin, Torrent and other companies take the remaining 4%

FMCG stocks are trading mixed with Hindustan Unilever and Gillette India trading the strongest. However, Dabur and Godrej Consumer are among the major losers. As per a leading financial daily, Hindustan Unilever (HUL) has plans to enter into agreements with the states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh in order to build a franchise for its largest selling soap brand - Lifebuoy. The company recently completed a pilot project in hand washing in Madhya Pradesh after signing a Memorandum of Understanding (MOU) with the state government. As per the company, bar soaps are growing faster in the rural markets and therefore it has chosen its leading brand - Lifebuoy, positioned on family hygiene, to generate majority sales from villages. HUL wants to avoid taking too many brands as it would confuse the rural consumer. By promoting through free samples and films, the company expects rural consumers to buy soap bar replenishments for Lifebuoy mostly in the lower SKU's of Rs 5 and Rs 10.