Sensex Trades on a Volatile Note; FMCG Stocks Drag

Wed, 14 Jun 01:30 pm

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After opening the day marginally higher, Indian share markets witnessed volatile activity and are currently trading flat with a positive bias. Sectoral indices are trading on a mixed note, with stocks in the oil and gas sector and the stocks in the capital sector witnessing maximum buying interest. Stocks in the FMCG sector and stocks in the metals sector are leading the losses.

The BSE Sensex is trading up by 47 points (up 0.2%) and the NSE Nifty is flat. Meanwhile, the BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 64.29 to the US$.

In news about the economy. According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) sunk to 2.17% in May, charting a steady decline from 5.9% in March 2017.

Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government last month, with 2011-12 as the base year, replacing existing the base year of 2004-05.

WPI continued to slide, and was lower than 3.85% seen in April.

The fall WPI, coupled with lower retail inflation and industrial production data may put pressure on the Reserve Bank of India (RBI) to change its policy stance to accommodative from neutral at present. The RBI, which kept its key lending rate unchanged last week, has warned of a looming inflation threat over the next 6-12 months, leaving the door ajar for an interest rate hike in 2017-18.

A lower inflation rate, can indicate a slowdown in demand and weaker economic activity.

WPI Inflation Continues to Slide

Among the WPI components, inflation of food decreased from 2.9% in April to 0.15% in May 2017, mainly contributing to the fall in WPI inflation. The inflation for fuels fell to 11.7% in May from 18.5% in April.

In its monetary policy review last week, the RBI cut its average inflation forecast from 4.5% in the first half of the year and 5% in the second half to the range of 2-3.5% in the first half of the year and 3.5-45% in the second half.

The Reserve Bank in its monetary policy review meeting on 8 June, kept the key policy rates unchanged, with the repo rate at 6.25% but increased SLR by 50 basis points.

In news from stocks in the pharma sector. Glenmark Pharma share price is in focus today.

Glenmark Pharma announced that it had received tentative approval form the US Food and Drug Administration (USFDA) approval for its Saxagliptin tablets.

Saxagliptin tablets, a generic version of Onglyza tablets of AstraZeneca AB, is used to control diabetes.

Citing IMS Health sales data for the 12 months to April 2017, the company said Onglyza tablets achieved annual sales of approximately US$ 518.5 million.The company's current portfolio consists of 117 products authorised for distribution in the US marketplace and 68 Abbreviated New Drug Applications (ANDA) pending approval with the USFDA.

had plunged by over 30% in the previous month over tepid results and subdued growth.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

The sector has faced great volatility over the years.

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

• Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, our research analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

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.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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