Sensex Falls 200 Points; Metal & Realty Stocks Plunge

Mon, 19 Mar 01:30 pm

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Indian share markets continued to witness selling pressure for the fourth straight session as India's current account deficit widened sharply driven by higher imports. The current account deficit widened to 2% of gross domestic product, or US$13.5 billion, up from 1.4%, or US$8.0 billion, in the corresponding period a year ago. Losses were largely seen in metal stocks, realty stocks and PSU stocks.

The BSE Sensex is trading lower by 204 points and the NSE Nifty is trading down by 78 points. Meanwhile, the BSE Mid Cap index is trading down by 1.6% & the BSE Small Cap index is down by 1.9%. The rupee is trading at 64.87 to the US$.

Domestic credit rating agency, ICRA in its latest report has said that the US president's recent move to impose a 25% tariff on all steel imports is unlikely to have any significant impact on the domestic steel industry in the medium term.

It noted that the tariffs will take effect on March 23, 2018 and would be effective on all countries except Canada and Mexico which together comprises about a quarter of the total US imports.

According to the report, the impact of import tariffs may not be significant in the medium-term due to reasons like global steel demand (ex-USA) is expected to increase by 25 MT in calendar year (CY) 2018.

It noted that India's steel exports to the USA market remained a meagre 0.7 MT in CY2017, accounting for less than 1% of India's domestic demand. Therefore, it pointed out that Indian steel mills should be able to find an alternate market for its nominal US export volumes without much difficulty.

The rating agency further stated that Chinese steel exports has been steadily declining in the last two years, reaching 75 MT in CY2017 from the peak level of 112 MT in CY2015, and in the current year too, exports have continued to shrink, declining by 27.1% in the first two months of CY2018. It also noted that this trend is expected to continue throughout CY2018 on the back of a resilient Chinese domestic demand and proposed steel capacity cuts.

Steel stocks are trading in red with Tata Steel share price and SAIL share price leading the losses.

In news from IPO segment, the Initial public offering of Bandhan Bank Ltd was subscribed 1.17 times on the last day of the shares sale on Monday. On the second day on Friday, the IPO had witnessed an overall subscription of 88%.

Bandhan Bank has set a price band of Rs 370-375 per share for its IPO. The issue closes on 19 March.

The IPO comprises a fresh issue of 97.66 million shares, which at the upper end of the price band will fetch the company Rs 36.6 billion. The proceeds from the fresh issue will be used to augment the bank's tier-I capital base to meet future capital requirements of the bank.

However, The market euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders. A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it.

Moving on to news from pharma sector. Lupin share price was trading on an encouraging note (up 0.8%) after the company received final approval for its Desoximetasone Topical Spray, 0.25%, 30 ml, 50 ml, and 100 ml from the United States Food and Drug Administration (USFDA) to market a generic version of Taro Pharmaceuticals USA Inc.'s Topicort Topical Spray, 0.25%.

Lupin's Desoximetasone Topical Spray, 0.25%, 30 ml, 50 ml, and 100 ml is the generic equivalent of Taro Pharmaceuticals USA Inc.'s Topicort Topical Spray 0.25%. It is a corticosteroid indicated for the treatment of plaque psoriasis in patients 18 years of age or older.

Desoximetasone Topical Spray, 0.25%, 30 ml, 50 ml, and 100 ml had annual sales of approximately US$19.5 million in the US.

Even as pharma companies reel under the regulatory crackdown in the largest export market in the US, there has been no succour from the domestic markets. The growth in the Indian pharmaceutical market almost halved to 5.5% in 2017. Only 3,932 brands were launched in 2017. This is the lowest since 2013.

Domestic Pharma Market in a slow lane

The leading therapy segments in terms of brand launches were dermatology, anti-infectives, cardiology, and gastroenterology. Anti-diabetics have also been growing in double-digits for the past five years. However, with the government bringing a number of essential drugs under price control, prescription drugs are witnessing sluggish growth. Therefore, pharma companies are now focusing on the over-the-counter (OTC) medicines.

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