Sensex Down 37 Points; Infosys Up on Q1 Results

Fri, 14 Jul 01:30 pm

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Indian share markets continue to trade near the dotted line during the noon session. Pharma stocks and bank stocks witnessed majority of the buying momentum. Software stocks and FMCG stocks traded in red.

The BSE Sensex is trading lower by 37 points and the NSE Nifty is trading lower by 18 points. Meanwhile, the BSE Mid Cap index is up by 0.2% & the BSE Small Cap index is down by 0.3%. The rupee is trading at 64.43 to the US$.

Infosys share price was trading up by 1.3% in noon session after the company reported 3.33% quarter-on-quarter (QoQ) in June quarter net profit at Rs 34.83 billion, which was above the Rs 34.29 billion street profit estimates.

The company also raised its full-year revenue guidance, halting a streak of three consecutive quarters when the company was forced to slash its revenue growth outlook.

For the 2017-18 financial year, Infosys said it expects to grow revenues at 7.1-9.1%, up from the 6.1-8.1% range it had forecast in April. Infosys maintained its constant-currency revenue forecast of 6.5-8.5%. For the June quarter, Infosys's dollar revenue came in at US$2.65 billion, growing 6% from last year.

Meanwhile, TCS share price was down 2% after the company posted 10% QoQ drop in June quarter net profit at Rs 59.50 billion, which was substantially below the Rs 62.03 billion profit estimate projected. This is the biggest drop in quarterly profit in two years.

As per an article in the Livemint, TCS is in a rut, with growth slowing almost every passing quarter. With market conditions being really unfavourable, the company desperately needs some imaginative leadership to get out of this rut.

Moving on to news from pharma sector. Biocon share price surged over 8.9% on the reports that the US Food and Drug Administration's (USFDA) oncology drugs advisory committee had recommended approval of their biosimilar trastuzumab, indicated for treatment of breast cancer.

Reportedly, Mylan and Biocon are exclusive partners on a broad portfolio of biosimilar and insulin products. The proposed biosimilar trastuzumab is one of the six biologic products co-developed by Mylan and Biocon for the global marketplace.

Further, no clinically meaningful differences existed between the biosimilar product and Roche Holding AG's innovation drug Herceptin.

The company also sees market opportunity for the biosimilar in emerging markets to be around US$ 1 billion. Herceptin, on the other hand, has an overall market size of US$ 2.6 billion in the US.

Notably, Biosimilars and Biologics are burgeoning sectors in 2017 also major scientific and technological advances, coupled with socio-demographic changes and increasing demand for medicines will revive the pharma industry's fortunes in another 10 to 20 years. But given the complexity of biologics, will Indian companies be able to break some ground in this space? (Subscription Required) One of our premium edition of The 5 Minute Wrapup offers a view on the same.

Moreover, according to a report by The Hindu Business Line, in spite of the prevailing challenges in the Indian pharma sector is expected to grow up to 45% by 2025 and 58,000 additional job opportunities are likely to be created in the industry.

Expediting Drug Approval Process to be a Positive for Industry

USFDA alerts on Indian pharma companies have increased over the past few years. Regulators used to visit the plants every two years. Now they come every eight months. Increasing inspections has led to a total of 41 import alerts in the past eight years - 33 of them (80%) in just the last four years (2013-16). This clearly signifies increased USFDA scrutiny on Indian pharma firms. If that wasn't enough, increasing pricing pressure in the generics segment has dented realizations.

In this dull scenario, there appears to be some respite as the USFDA has expedited the drug approval process. Drug approvals for Indian companies have gone up 50% in the period from January to June 2017 compared to the same period last year.

In the latest issue of The India Letter (subscription required), we have identified a pharma stock which we believe will outlast others in the long run.

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

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