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Major Asian stock markets have opened the day on a mixed note. The stock market in Japan and Hong Kong are trading lower by 0.8% and 0.6% respectively. Whereas, stock market in Taiwan is trading higher by 0.6%. Major indices in Europe and US ended their previous session in red. The rupee is trading at 67.22 per US$.
Indian stock markets have opened the day on a negative note. The BSE Sensex is trading lower by 84 points (down 0.3%) and NSE Nifty is trading lower by 16 point (down 0.2%). Both, BSE Mid Cap and BSE Small Cap is trading lower by 0.5% and 0.1% respectively. Barring, capital goods sector, major sectoral indices have opened the day in red. Stock from pharmaceutical and telecommunication sector are witnessing maximum selling pressure.
As per an article in Livemint, Indian merchandise exports contracted for the 15th month in a row in February. The contraction was on account of tepid global demand and volatile global currency market. Exports contracted by 5.7% in February. However, this is still better when compared to other emerging economies like China, wherein exports contracted by 25.4% in the same month. Chinas exports fared far worse than expected.
In order to boost the exports, the government has implemented an interest stabilization scheme and has raised the duty drawback rates for exporters. The increase in duty drawback rates will help exporters recover higher input tax outgo that they pay during the process of making final product. While, the interest stabilization scheme will allow exporters to receive bank loans at lower rate of interest.
Reportedly, shipments of 14 out of the 30 top export items grew in February. Exports of gold and jewellery, pharmaceuticals and chemicals grew by 11.2%, 8.8% and 4.5% respectively. Whereas, exports of engineering goods, readymade garments and petroleum products fell by 11.2%, 0.7% and 28.3% respectively.
Since, exports constitute about 18% to the Gross Domestic Product (GDP), a pick-up in the global demand would be closely assessed.
In another news update, market research agency AIOCD (All Indian Origin Chemists & Distributors Ltd.) Pharmasofttech AWACS Pvt Ltd stated that the domestic sales of the pharmaceutical companies are likely to get impacted by an estimated 4.5%. The fall is estimated on account of two counts.
First being, the government's decision to ban 344 fixed dose combination (FDC). Reportedly, the ban on specified FDCs can result in a cut of 3.1% in industry sales. Further, revenues of companies such as Pfizer and Glenmark will be significantly impacted due the FDC ban.
Second is the price revision of existing drugs under price control. The price revision is based on the Wholesale Price Index (WPI). The WPI is in the negative territory and is expected to remain low for a longer period. This will not augur well with the price increase. Reportedly, this too will affect the revenues.
The challenges for the Indian companies have amplified since some time now, companies are already facing pressures in the global markets. Stringent regulations, increasing competition and depreciating currencies have already impacted their sales. The proposed regulation will further impact the companies' earnings.
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