Sensex Trades on a Volatile Note; FMCG, Pharma Stocks Rally

Fri, 22 Jun 12:30 pm

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After opening the day flat share markets in India are trading on a dull note and are presently trading marginally above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the FMCG sector and stocks in the pharma sector witnessing maximum buying interest.

The BSE Sensex is trading up by 40 points (up 0.1%) and the NSE Nifty is trading up by 12 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading down by 0.2%. The rupee is trading at 67.73 to the US$.

In news from stocks in the pharma sector. Glenmark Pharma share price is in focus after the US Food and Drug Administration (USFDA) approved the first product from its North Carolina, US based manufacturing facility.

The approval covers Atovaquone and Proguanil Hydrochloride tablets, a generic version of GlaxoSmithKline's Malarone tablets.

The North Carolina facility is Glenmark's first manufacturing site in the US, designed to manufacture a variety of fixed dose pharmaceutical formulations. Notably, Glenmark has invested more than USD 100 million into the facility with plans for further expansion in the coming years.

Glenmark has 16 manufacturing facilities in Europe, India and the US.

At the time of writing, Glenmark Pharma share price was trading up by 0.5%.

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.

Generic Drug Approvals Hit the Roof

Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year. While, faster approvals expedite the commercialisation of product pipelines of domestic pharma companies spurring growth. At the same time however, it has raised the intensity of competition resulting in pricing pressures. The price erosion has been further compounded by a consolidation among US distributors and the decline in the number of products going off-patent over the past few years.

In other words, acceleration in generic drug approvals is like a double-edged sword. The growth boost can be quickly offset by the ensuing pricing pressures. Pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market.

Therefore, despite a lot of pessimism surrounding pharma stocks on regulatory uncertainty, we have stocks in open positions in StockSelect and have remained bullish on pharma stocks in our long term service, ValuePro

Moving on to news from stocks in the banking sector. IDBI Bank share price is in focus today amid media reports stating the government was considering a proposal to sale over 40% stake in the company to the Life Insurance Corporation of India (LIC).

A stake sale of 40-43% in the lender could net the government over Rs 100-110 billion.

The government owns over 81% stake in IDBI Bank, while LIC holds 10.8%.

However, neither of the parties have confirmed such a stake sale, and the iInvestment decision will go through LIC Investment & Strategy Committee and the quantum of stake buy will depend on negotiations & decision by the committee.

Notably, the government had announced that it would bring its stake in IDBI Bank below 50% in the Union Budget 2016.

The IDBI Bank board is scheduled to meet soon to draw capital raising plan for the next five years.

At the time of writing, IDBI Bank share price was trading up by 2%.

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