Sensex Opens Flat; IMD Predicts Normal Monsoon for 2018

Tue, 17 Apr 09:30 am

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Asian share markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.1% while the Hang Seng is down 0.2%. The Shanghai Composite is trading down by 0.4%.

Back home, India share markets opened the day on a flat note. The BSE Sensex is trading higher by 15 points while the NSE Nifty is trading up by 3 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.4 & 0.2% respectively.

Sectoral indices have opened the day on a mixed note with metal stocks and stocks in the power sector witnessing buying interest. While, IT stocks & energy stocks have opened the day in red. The rupee is trading at 65.46 to the US$.

In news from stocks in the pharma sector. Cipla share price is in focus today after the United States Food & Drug Administration (USFDA) completed its inspection of the company's Indore facility with no integrity or repeat observations for the unit.

The US regulator which began inspections on 2 April 2018, cleared the facility with nothing adverse to report.

Note that Cipla's Indore facility had earlier received nine observations from the USFDA in 2015 and which were cleared in 2016.

Further, in January 2018, the USFDA had conducted a product specific pre-approval inspection at Goa plant and issued certain observations which were procedural in nature. Post that inspection, it had received two product approvals from the plant.

Cipla share price opened the day down by 0.3%.

BSE Healthcare Index Down 26% in Three Years

Speaking of pharma stocks, Divis Laboratories share price has hit a 52-week high. Things seem to be looking up for the pharma sector.

Is this the right time to buy pharma stocks?

There was a time when almost every stock in the pharma sector was considered to be a safe stock. You could just pick the top 5-6 companies from this sector and expect to make decent returns over time.

In fact, it was termed as defensive sector. However, in last two years things have changed a lot. There is enormous uncertainty in the industry.

Uncertainty regarding price erosion in the United States as well as hostile US FDA visits, have changed a once defensive sector into a risky sector.

However, we believe this could be point of consolidation in the industry i.e. with stricter norms, lower margins, and pricing pressure, the industry may see many exits and acquisitions. This could lead to relatively fewer but higher quality players.

We believe, if you can pick a niche company with good financials and strong management, this is a good time to consider pharma stocks.

Moving on to news that could bring cheer to the economy, the Indian Meteorological Department (IMD) predicted 'normal' monsoon rains this year.

In its first stage long range forecast the IMD said that rainfall will be 97% of the 50-year average with a 54% probability that rains will be normal to above normal.

Probability that rainfall will be deficient (less than 90% of 50 year average) is 14%, it added.

A normal, or average, monsoon means rainfall between 96% and 104% of a 50-year average of 89 cm (35 inches) in total during the four-month monsoon season from June, according to the IMD's classification.

The onset of the monsoon in June is the trigger for planting of rain-fed Kharif crops. India receives 70% of its annual rainfall in the four-month period, which in turn irrigates over half of its farm lands lacking assured irrigation.

A normal monsoon is crucial to push economic growth, which slowed last year under the lingering impact of demonetisation and disruptions due to implementation of the goods and services tax (GST), both of which impacted private consumption demand as well as exports.

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