Indian share markets continue to slide

Mon, 19 Aug 11:30 am

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After opening weak Indian share markets continued the downslide in the last two hours of trade. Barring Metal and Consumer Durables, all other sectoral indices are trading in the red. Auto and Bankex indices have been the biggest losers.

BSE-Sensex is down 176 points and NSE-Nifty is trading down 67 points. BSE Mid Cap is trading down 0.86% and BSE Small Cap index is trading down 0.70%. The rupee is trading at 62.3 to the US dollar at the time of writing.

Metal stocks are trading mixed today and all aluminum stocks are trading in green. The top gainers are Sterlite Ind and Hindalco. According to a leading financial daily, Hindalco will produce around 3 m tonnes of alumina and 1 m tonne of aluminium from 2014 onwards. This is because the company expects that the production from its Mahan and Utkal Alumina smelter is likely to come on-stream from 2014. Trial production at Mahan in Madhya Pradesh has begun. The project includes a smelter-power plant complex, which comprises of 359 kilo tonnes p.a. aluminium smelter and a 900 MW captive thermal power plant. The company is expecting stage two clearance of Mahan coal block within few months. The company has access to the coal block through a joint venture with Essar Power.

The other plant at which company is increasing production is Utkal Alumina project. This will produce 1.5 million tonnes of alumina p.a. The management expects that the output from Utkal will be able to feed alumina to Mahan and Aditya Smelters.

On a cautious note, the management has commented that Hindalco may not be able to fully utilize the advantage of their production ramp-up in the near-term as there is a slowdown in demand. Also, the final clearances for the coal block are still pending for the Mahan smelter. However, in the long term when the demand picks up, the company will be able to capitalize on its large assets base to meet the demand. Hindalco stock is trading up by 2.8%.

Pharma stocks are trading mixed today with Wockhardt up 2.1% and Cipla down 1.3%. Strides Arcolab is trading in the green after it got the Indian Prime Minister's approval for the $1.6 bn acquisition of its injectible medicine business, Agila Specialties, by US based Mylan Inc. In giving this approval the Prime Minister has overruled the concerns raised by Department of Industrial Policy and Promotion (DIPP) and Ministry of Health. However, this deal might come with certain riders. The DIPP had informed the Prime Minister that brown field FDI in pharma merely leads to substitution of domestic capital. In other words, domestic pharma companies would be negatively affected. Earlier, the Foreign Investment Promotion Board (FIPB) had kept its approval for this deal on hold, till there was more clarity on brown field FDI norms in the pharma sector, which would include norms for takeovers.

Now, the deal will be brought to the Cabinet Committee on Economic Affairs (CCEA) under existing policy, to get the final approval. Under the terms of the agreement, Strides and its subsidiary will receive an aggregate sum of $1.6 bn in cash and a potential additional consideration of up to $250 m subject to the satisfaction of certain conditions by Strides. The Agila Specialties division recorded sales of $255 m and EBITDA of $86 m for the year ended 31 December 2012. Strides Arcolab is trading up 2%.