Banking, auto stocks drag the markets

Thu, 2 Jun 01:30 pm

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The Indian stock market indices continued to trade in the red during the previous two hours of trade as there was relentless selling pressure on index heavyweights. Stocks from the banking, auto, realty and metal sectors are leading the pack of losers, while those from the FMCG and consumer durables space are trading firm.

The BSE-Sensex is trading down by 119 points, while NSE-Nifty is trading 41 points below the dotted line. BSE Midcap and BSE Small cap indices are down 0.5% and 0.6% respectively. The rupee is trading at 44.92 to the US dollar.

Pharma stocks are trading mixed with Wockhardt, Glenmark Pharma, and Sun Pharmaceutical Industries leading the pack of gainers. However, Orchid Chemicals, Indoco Remedies and Dishman Pharma are trading weak. As per a leading financial daily, Sun Pharmaceutical Industries is now eyeing foreign markets other than the US from where it gets 30% of its revenues. These mainly include Brazil, Mexico, Russia and South Africa. As per a company official, the company's business in these markets has witnessed a CAGR of around 40% for close to a decade now. The CEO of the company had earlier suggested that markets like Brazil, Russia, Mexico and South Africa will be a critical part of the firm's emerging markets strategy, while the company would also look at increasing focus in countries like Venezuela, Vietnam and Algeria. As of now, the emerging markets contribute 10% to the firm's topline.

Emerging markets have become important for the company since, unlike the US and European Union that are growing at a single digit rate, markets like Russia and Brazil are growing at rate higher than 20% YoY. This is on account of rising disposable incomes and focus on lifestyle disorders. The other incentive is high margins (more than 20%) in emerging markets.

Auto stocks are trading mixed as well with Bajaj Auto, Hero Honda and Eicher Motor leading the pack of gainers. However, Tata Motors and Mahindra & Mahindra (M&M) are trading weak. In a recent development, Tata Motors has decided to set up a Jaguar-Land Rover (JLR) engine assembly unit in India. This strategic move to go the Complete Knocked Down (CKD) way will allow Tata Motors to save the 10% duty charges that it would have otherwise had to pay to the government. JLR'S spokesperson has added that initial investment in the plan would start with GBP 400 m. It is said that the latest facility will be a carbon copy of JLR's new engine manufacturing facility in the Midlands, UK. It is expected that Land Rover's cheapest offering, the 'Freelander 2' would be the first of the JLR assembled cars in India. JLR's CKD assembly in India would also assist Tata's ambitions to start an organised technology trickle-down from JLR leading to more efficient and able Tata Safaris and Arias in the future. It must be noted that the annual cumulative production capacity of both the plants in India and UK is around 0.5 m units.