Sensex Opens 240 Points Lower; Metal & PSU Stocks Drag

Mon, 13 Aug 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 1.7% while the Hang Seng is down 1.8%. The Nikkei 225 is trading down by 1.6%. US stocks slid on Friday as a deepening economic crisis in Turkey dragged on bank shares and triggered a move out of riskier assets.

Back home, India share markets have opened the day on a lower note. The BSE Sensex is trading down by 239 points while the NSE Nifty is trading down by 80 points. The BSE Mid Cap index opened and BSE Small Cap index opened the day down by 0.9% & 0.7% respectively.

The rupee is currently trading at 68.95 to the US$.

Sectoral indices have opened the in on a mixed note with information technology stocks and healthcare stocks witnessing maximum buying interest. While, metal stocks and PSU stocks have opened the day in red.

In the news from the pharma sector. As per an article in a leading financial daily, Cipla has received final approval for its abbreviated new drug application (ANDA) for Atazanavir Caps 100mg, 150mg, 200mg, and 300mg from the United States Food and Drug Administration (USFDA).

According to IQVIA (IMS Health), Reyataz and its generic equivalents had US sales of approximately US$324mn for the 12-month period ending April 2018.

Cipla's Atazanavir Caps 100mg, 150mg, 200mg, and 300mg are an AB-rated generic therapeutic equivalent version of Bristol-Myers Squibb Pharma Company's, Reyataz.

It is a protease inhibitor indicated for use in combination with other antiretroviral agents for the treatment of HIV-1 infection in patients aged 6 years and older and weighing at least 15 kg.

Cipla share price opened the day up by 0.6%.

Speaking of the pharma sector, the BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times.

The Roller Coaster Ride of the BSE Healthcare Index

Since then it has been a painful ride downwards.

Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.

The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities.

The regulatory issues coupled with price erosion in US markets has impacted the business of major pharma players.

Moving on to the news from the economy. In the latest development, India's factory output grew at its fastest pace in five months at 7% in June on the back of a lower base last year due to destocking by businesses ahead of introduction of the Goods and Services Tax (GST).

The radical indirect tax reform was introduced on 1 July 2017 and disruptions continued till October. This may provide a favourable base for higher growth in the index of industrial production (IIP) in coming months.

Consumer goods, which was the worst affected sector in the run up to the introduction of GST, grew at a 21-month high of 13.1% in June. While capital goods maintained a positive growth rate at 9.6% during the month.

However, consumer non-durables continued their dismal performance, growing at 0.5% in June, reflecting poor rural demand conditions. This is expected to change with the India Meteorological Department (IMD) last week predicting favourable distribution of rainfall during August and September, the reports noted.

As per India Ratings and Research, while primary goods, one of the lead indicators of industrial growth, is exhibiting good growth and gives confidence of sustained industrial recovery, intermediate goods do not give much confidence on sustainability of the recovery.

Note that, RBI's monetary policy committee raised policy rates by 25 basis points to 6.5% earlier this month. This is the first time since October 2013 that RBI has raised rates in consecutive meetings of its rate-setting panel.

However, at Equitymaster, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies.

The ValuePro team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.

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

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