Sensex Opens Flat; IT Stocks Top the Gainers

Tue, 6 Jun 09:30 am

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Asian equity markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.72%, while the Hang Seng is down 0.23%. The Shanghai Composite is trading down by 0.15%. The US market slipped on Monday weighed down by fall in Apple.

Meanwhile, share markets in India have opened the day on a flat note. The BSE Sensex is trading higher by 32 points while the NSE Nifty is trading higher by 19 points. The BSE Mid Cap and BSE Small Cap index have opened the day up by 0.2% & 0.3% respectively.

Sectoral indices have opened the day on a mixed note with information technology stocks and automobile stocks leading the gainers. While, FMCG stocks and consumer durables stocks are witnessing selling pressure. The rupee is trading at 64.35 to the US$.

Pharma stocks opened the day on a mixed note with Elder Pharma and Dishman Pharma leading the gainers. As per an article in a leading financial daily, Cadila Healthcare's subsidiary Zydus Cadila Healthcare Ltd. has received the US health regulator's nod to market Mirtazapine orally disintegrating tablets, an antidepressant, in the American market.

The company has received the final approval from the US Food and Drug Administration (USFDA) to market Mirtazapine - orally disintegrating tablets USP - in strengths 15mg, 30mg and 45mg.

The company will manufacture the product at its facility in Baddi. The firm has more than 115 approvals and has filed over 300 abbreviated new drug applications (ANDAs) since it commenced filings in 2003-04.

Meanwhile, it was reported that the country could be staring at an acute shortage of medicines in the second half of June if the government or manufacturers don't look into potential losses faced by pharmacists from GST's rollout on July 1.

Pharmacy retailers and stockists have warned companies that a mismatch between tax payouts and tax refunds arising from GST rollout would force them to destock.

'Safe Haven' Pharma Sector in Decline since 2 Years

The pharma sector, once considered a safe haven for investors has been on a steady decline over the past two years.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

Cadila Healthcare share price began trading up by 3.8%.

Moving on to the news from stocks in the bank sector. As per an article in a leading financial daily, State Bank of India (SBI) has launched the country's largest institutional share sale programme, aiming to raise up to Rs 150 billion.

The move comes on the back of its aim to strengthen its capital base to increase loan growth as well as cushion the balance sheet from bad loans.

The floor price in respect of the issue, based on the pricing formula of SEBI, is Rs 287.58 per equity share of the bank and the relevant date for this purpose is 5 June 2017.

SBI had indicated its intention to raise funds from the capital market. SBI's share sale comes as banks face raising billions of dollars in new capital by March 2019 to meet global Basel III banking rules. Banks will also need more capital as they make higher provisions for bad loans as per the directive of the RBI.

Notably, SBI's capital adequacy ratio, at 13.11%, which includes 10.35% of tier-I capital, is higher than the regulatory requirement of 9%. It has received Rs 56.81 billion of capital from the government in FY17.

Apart from SBI, many other public sector lenders like Bank of Baroda, IDBI Bank, Oriental Bank of Commerce, and Union Bank of India - among others, are planning to raise funds through QIP.

Further, an article in the Economic Times highlights that Indian companies are expected to raise Rs 100-120 billion through QIPs in the next few weeks. So, are the QIPs making a comeback? While 2016 started off on a poor note, the month of September alone has seen Rs 32 billion raised through 6 issues.

Our research analyst, Madhu Gupta had pointed out in one of the edition of 5 Min WrapUp:

• "Banks in particular have been keen on raising funds to shore up their capital in an environment where the asset quality risks in the banking sector have risen. Even for the other sectors, as investment activity picks up, capex will see a revival too. Thereby, supporting the case for a rise in QIP activity in the coming quarters."

SBI share price opened the day up by 1.4%.

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