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Sensex Ends in the Red; Healthcare Stocks Slump
Wed, 9 Aug Closing

After opening the day marginally lower, share markets in India continued to witness selling pressure in the afternoon session and ended the day in red for a third consecutive session. Losses were seen across all sectors with stocks in the pharma sector and stocks in the auto sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 216 points (down 0.7%) and the NSE Nifty closed lower by 71 points (down 0.7%). The BSE Mid Cap index ended the day down by 1.7%, while the BSE Small Cap index ended the day down by 1.9%.

Asian stock markets finished lower over geopolitical tensions. As of the most recent closing prices, the Hang Seng was lower marginally by 0.4% and the Shanghai Composite was lower by 0.2%. The Nikkei 225 lost 1.3%. European markets too were trading in red. The FTSE was 100 off by 0.8%. The DAX was lower by 1.3% while the CAC 40 was down by 1.8%.

The rupee was trading at Rs 63.73 against the US$ in the afternoon session. Oil prices were trading at US$ 49.38 at the time of writing.

In news from stocks in the automobiles sector. Tata Motors reported a growth of 12% in cumulative vehicle sales in July. Total sales including those of Jaguar Land Rover (JLR) vehicles stood at 98,534 in July 2017, as against 88,159 units in the same period last year.

In the passenger vehicles (PV) category, global sales stood at 66,508 units last month as against 57,796 during the same period in 2016, a growth of 15%. The company's commercial vehicles segment rose by 5% in July.

The luxury Jaguar Land Rover range sold 51,425 vehicles (including Chery JLR volumes of 6,805 units) - Jaguar 14,452 vehicles and Land Rover 36,973 vehicles. A total increase of 17% over the same period last year. JLR sales were supported by a rise of 34% year-on- year in China after the introduction of the new long wheelbase Jaguar XFL in the country.

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In June, Tata Motors had seen a marginal drop in sales of 9% in overall volumes in the run up to the Goods and Service Tax (GST) implementation. The company said that mixed consumer sentiments towards the implications of GST impacted the passenger vehicle business sales which dropped by 10%, even though the company's commercial vehicles business grew on a month-on-month basis.

While the impact of GST seems to be now subsiding, the company further stands to gain from India's growth potential in the PV market.

India Tops Growth in PV Sales

India is the fastest growing market for (PV) among the top seven car markets. China continues to be the world's biggest auto market by volume.

During January- May 2017 period, India's PV sales expanded by 11.3% YoY. This came when the top two markets, China and the US saw a declining trend where volumes declined by 2.6% YoY and 9.8% YoY respectively. India's double-digit growth was led by companies like Maruti Suzuki, Hyundai, Honda and Tata Motors.

The double-digit growth came despite the auto industry witnessing some turbulent time in the last six months as demonetisation put a pause on a great run. Towards the end of fiscal year, a Supreme Court order banning the sale of vehicles that don't conform to Bharat Stage IV emission rules saw some fire sale.

Nevertheless, the blip is expected to be temporary. Reduced vehicle prices post GST, low interest rates, attractive discounts and expectation of good monsoons, will provide support to the industry.

As per Market research firm JD Power, Indian passenger car segment is expected to grow by over four-fold in 2020 and expects India to grow into the third-biggest car market.

Tata Motors share price closed the day down by 3.2%.

Moving on to news from stocks in the pharma sector. Cadila Healthcare share price was in focus today.

Cadila Healthcare announced that it had received final ANDA (abbreviated new drug application) approval from the US Food and Drug Administration (USFDA) for its Diltiazem Hydrochloride capsules.

Diltiazem Hydrochloride capsules, will be manufactured at the company's formulation manufacturing facility at the Pharma SEZ in Ahmedabad. The drug is used to treat high blood pressure, angina (chest pain) and certain heart rhythm disorders.

Citing IMS Health sales data for the 12 months to June 2017, the company said Diltiazem achieved annual sales of US$ 191.1 million.

The company's current portfolio consists of 140 products authorised for distribution in the US marketplace and has so far filed over 300 abbreviated new drug applications (ANDAs) since it commenced filings in 2003-04.

closed the day down by 8.8%.

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.

Give it a read to better understand the problems facing the pharma sector.

And here's a note from Profit Hunter:

The pharma sector continues to bleed. All Nifty Pharma Index stocks are trading in the red today. Yesterday we saw Dr Reddy plunge 5%, and today it is Cadila Healthcare (-8.5%), Divis Labs (-5%), and AuroPharma (-6%) who are leading the down move.

We reviewed Cadila Healthcare back in March. The stock was trading near 450, the previous high made in October 2015. This previous high acted as resistance. And we mentioned that a successful penetration of this level would help the stock resume its up move.

The stock broke above this level and rallied 23% from there to 550. But the stock reacted twice from that level to form a double top pattern. Today, it broke below this pattern with heavy volumes, indicating weakness in the stock.

So will the stock again drag back to 450 levels? And if it does, could it find support there as per the change of polarity principle (previous resistance now support)?

Cadila Healthcare Plunges 8.5% for the Day
Cadila Healthcare Plunges 8.5% for the Day

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Feb 23, 2018 01:27 PM