After starting today’s session on a negative note in the morning Indian indices are still languishing in the red. Other key Asian markets are trading weak as well with Hong Kong (down 1%) leading the pack of losers. Currently heavyweights in the Sensex are trading mixed with stocks from FMCG and IT space facing the brunt of selling activity. However, stocks from metal and realty space have latched on healthy gains.
The BSE-Sensex is trading down by around 10 points, while the NSE-Nifty is trading flat. Buying interest is muted amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.5% and 0.6% respectively. The rupee is trading at 46.24 to the US dollar
Banking stocks are trading mixed with IndusInd BankKotak Mahindra bank leading the gains. However,PNB and Bank of Baroda are at the receiving end. Bank of Baroda announced its 1QFY11 results recently. Net interest income increased 54% YoY in 1QFY11 on the back of strong growth in advances. While the overseas book grew at a faster clip, the domestic advances growth also outperformed the sector average. Despite the pressure on overseas interest rates, the bank's margins (NIMs) improved from 2.4% in 1QFY10 to 2.9% in 1QFY11 due to re-pricing of domestic assets. However, other income declined 12% YoY backed by marginal growth in fees and fall in treasury income. The bank's cost to income ratio declined from 47% to 41% for the domestic operations in 1QFY11. For the overseas operations it stood at 20% in 1QFY11. However, the net NPAs went up marginally from 0.3% of total advances in 1QFY10 to 0.4% in 1QFY11.
Pharma stocks are trading positive with Wockhardt and Orchid Chemicals leading the gains. Dr Reddy’s recently launched a biosimilar (off-patent version) of an anemia drug. This will help cut treatment costs by about half. The ‘darbepoentin alfa’ medicine is to be sold in India under the brand name Cresp and is used to treat anemia resulting from chronic kidney diseases or chemotherapy. Currently, such anemia is treated in India with ‘epoetin alfa’, a synthetic hormone that controls red blood cell production. It is sold by Johnson and Johnson under the brand name Eprex at Rs 10,000 for a month’s treatment. Cresp will be attractively priced at only Rs 4,500.
Dr Reddy’s is confident of being able to expand the market with its pricing, which it has done in the past. The company stated that the market size for ‘darbepoetin alfa’ in India is Rs 1.5 bn. Amgen’s Aranesp saw sales of about US$ 2.7 bn globally in 2009. The Indian pharma company plans to spend Rs 300 - 400 m on biologics (new drugs created from the biological process) R&D and Rs 1.5 bn on capex over the next 2 years. Once these products our launched Dr Reddy’s could become one of the biggest players in the world in the biologics field.