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Sensex Opens Marginally Lower; Realty & Metal Stocks Drag
Wed, 25 Apr 09:30 am | Rini Mehta, TM Team

Asian share markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.7% while the Hang Seng is down 1%. The Shanghai Composite is trading down by 0.4%. A gauge of world stocks tumbled on Tuesday, erasing early gains as US bond yields scaled the 3% threshold for the first time in four years, while oil prices reversed course after climbing above the US$75 per barrel mark.

Back home, India share markets opened the day on a negative note. The BSE Sensex is trading down by 35 points while the NSE Nifty is trading down by 7 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.4% & 0.3% respectively.

Barring information technology stocks & energy stocks, all sectoral indices have opened the day in red with realty stocks and metal stocks witnessing maximum selling pressure. The rupee is trading at 66.36 to the US$.

In the news from the economy. The yield on the 10-year Treasury note, which helps set rates for auto loans, mortgages and other lending, climbed to 3% on Tuesday for the first time since 2014.

For Americans, that means borrowing costs are on the way up. For Wall Street, it's a warning that higher interest rates may eat into corporate profits and that faster inflation is coming. Both of which could eventually hurt the economy.

Market participants also worry that the Republican tax cuts for businesses and individuals will cause the economy to grow too quickly.

As per the reports, the Federal Reserve is expected to raise short-term interest rates at least twice more this year and three times in 2019, in an effort to tap the economy's brakes. That will probably lead to even higher rates on longer-term Treasuries.

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In another potential warning sign in the bond market, short-term rates have also been rising. The difference in yields between short-term bonds and the 10-year note is narrowing, a phenomenon known as a flattening yield curve.

Why is this a problem? If short-term rates move higher than long-term rates, that creates something known as an inverted yield curve. And that has often happened just ahead of recessions.

But others argue that Treasury yields should be going up, because the US economy is in good shape. Rates are climbing around the world, too, as Europe's economy stabilizes and China and India post strong growth.

Moving on to the news from pharma space. As per an article in a leading financial daily, Dr Reddy's Laboratories has received an establishment inspection report (EIR) from the US health regulator after audit of its UK facility.

The USFDA issues an EIR to the establishment that is the subject of an FDA or FDA-contracted inspection when the agency decides to close the inspection.

In September last year, the US health regulator had made three observations after inspecting Dr Reddy's Laboratories' API Mirfield plant, United Kingdom.

Meanwhile, Strides Shasun will divest 100% stake in subsidiary Strides Chemicals Private Limited, to Solara Active Pharma Sciences for a cash consideration of is Rs 1.3 billion.

This forms a related party transaction as both the companies have the same promoter, the valuation, however, has been done by independent valuers.

Strides, in December 2016, had acquired Perrigo's USFDA approved API facility located in Ambernath for Rs 1 billion. This facility has API manufacturing capacity of 600 tonnes per year. This business was later renamed as Strides Chemicals. Strides Shasun, has not made any investment in this business after the acquisition.

Through this acquisition, the company had intended to vertically integrate with the generics business.

However, with the business focus now moving away from the low margin businesses, the company has now divested its last remaining API facility.

Dr. Reddy's share price opened down by 0.9% while Strides Shasun share price opened up by 0.1%.

Did you know the BSE Healthcare Index is down 20% over the past three years? During the same period, the BSE Sensex is up 21%.

The BSE Healthcare Index has underperformed the Sensex

And this was a sector they called 'evergreen'.

Have Investors boarded a plane that's about to crash? Or is it just turbulence on the way to a smooth and safe landing?

It's important to understand the core issues. Regulatory problems for pharma companies have increased over the past few years. The frequency of visits as well as quality expectations have increased a lot.

The intensity of competition has also increased. Faster approvals of drugs have led to price erosion for generic players.

While we expect the pain to continue in the short-term, the long-term picture still looks bright.

Stricter norms and pricing pressure will ensure only quality players remain. Companies with strong R&D facilities and quality compliant plants will have an edge over the others.

Those are the only pharma stocks you should be looking at.

And even among those, only three of them offer enough margin of safety today.

Get access to the safe stocks here.

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Stock Market Updates

MAX FINANCIAL SERVICES LTD Plunges by 5%; BSE 500 Index Down 1.5% (Today's Market)

Dec 10, 2018 12:29 PM

MAX FINANCIAL SERVICES LTD share price has plunged by 5% and its current market price is Rs 425. The BSE 500 is down by 1.5%. The top gainers in the BSE 500 Index are HIMACHAL FUTURISTIC (up 4.0%) and NARAYANA HRUDAYALAYA LTD (up 3.0%). The top losers are MAX FINANCIAL SERVICES LTD (down 5.1%) and KOTAK MAH. BANK (down 6.3%).

KOTAK MAH. BANK Plunges by 5%; BSE BANKEX Index Down 1.6% (Today's Market)

Dec 10, 2018 11:39 AM

KOTAK MAH. BANK share price has plunged by 5% and its current market price is Rs 1,289. The BSE BANKEX is down by 1.6%. The top gainers in the BSE BANKEX Index is FEDERAL BANK (up 1.1%). The top losers is KOTAK MAH. BANK (down 5.1%).

The BSE CAPITAL GOODS Index Down 2% ; NBCC (INDIA) LTD Among Top Losers (Today's Market)

Dec 10, 2018 10:49 AM

The BSE CAPITAL GOODS Index Down at 18,109 (down 2.1%). Among the top losers in the BSE CAPITAL GOODS Index today are NBCC (INDIA) LTD, DILIP BUILDCON LTD and BHEL. Meanwhile, the BSE Sensex has plunged 1.7% to 35,247.

INDIABULLS REAL EST Plunges by 5%; BSE REALTY Index Down 2.7% (Today's Market)

Dec 10, 2018 10:41 AM

INDIABULLS REAL EST share price has plunged by 5% and its current market price is Rs 73. The BSE REALTY is down by 2.7%. The top losers is INDIABULLS REAL EST (down 5.1%).

ASHOKA BUILDCON Surges by 5%; BSE REALTY Index Down 2.7% (Today's Market)

Dec 10, 2018 10:31 AM

ASHOKA BUILDCON share price has surged by 5% and its current market price is Rs 128. The BSE REALTY is down by 2.7%. The top gainers in the BSE REALTY Index is ASHOKA BUILDCON (up 5.1%). The top losers are MAHINDRA LIFESPACE (down 1.6%) and SOBHA LIMITED (down 2.1%).

Sensex Plunges Over 500 Points; Power & Realty Stocks Hit Hardest (Today's Market)

Dec 10, 2018 09:30 am

Indian share markets plunge in the opening session with Sensex down by 510 points, while the Nifty is trading down by 163 points

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Dec 10, 2018 01:51 PM