Indian Indices Close at All Time Highs; Power Stocks Top Gainers

Mon, 27 Aug Closing

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After opening the day in green, share markets in India witnessed positive trading activity throughout the day and ended the day in green, at a new all-time high close. Sectoral indices too ended the day in green, with stocks in the power sector and stocks in the banking sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 442 points (up 1.2%) and the NSE Nifty closed up by 135 points (up 1.2%). The BSE Mid Cap index ended the day up 1.1%, while the BSE Small Cap index ended the day up by 0.7%.

Asian stock markets finished in green. As of the most recent closing prices, the Hang Seng was up by 2% and the Shanghai Composite was up by 1.9%. The Nikkei 225 was up by 0.8%. Meanwhile, European markets were trading on a positive note. The FTSE 100 was up by 0.2%, The DAX, was up by 0.6% while the CAC 40 was up by 0.5%.

The rupee was trading at Rs 70.11 against the US$ in the afternoon session. Oil prices were trading at US$ 74.8 at the time of writing.

What cycle of the markets are we in? Are we at the peak or is the party set to continue? The Sensex seems to be touching new all-time highs every single day.

We believe that when earnings improve and stock prices also go up, it's time to hold on and enjoy the ride.

But the current situation is different. While the Sensex is reaching new highs, the mid cap index and the small cap index have corrected sharply this year.

Also, the recent earnings of non-financial companies present a promising picture. But is it a true picture of what lies ahead?

Is the Growth Story Back for Listed Indian Companies?

For listed non-financial entities, net sales for the June quarter grew by 18.5% over the same quarter last year. Net profits were up by 33.6%.

This is good but remember, it was mainly due to the low base of last year. You see, at this time last year, a lot of companies were severely impacted by the twin effects of demonetisation and the GST implementation.

So, will this growth sustain?

Recent scenarios developing in global markets calls for caution. Rising interest rates and crude oil prices, along with trade wars can be a road-block for emerging markets like India.

With markets at peak levels, I believe a correction cannot be ruled out.

The time to short-list good quality stocks might just be around the corner.

Moving on to news from stocks in the pharma sector. Lupin share price is among the stocks in focus today as the company launched contraceptive drugs in the US.

The company launched Drospirenone, Ethinyl Estradiol, Levomefolate Calcium tablets and Levomefolate Calcium tablets, in the US markets after it received approval from the US Food and Drug Administration (USFDA) earlier.

Lupin share price ended the day up by 0.6%.

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.

Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year. While, faster approvals expedite the commercialisation of product pipelines of domestic pharma companies spurring growth. At the same time however, it has raised the intensity of competition resulting in pricing pressures. The price erosion has been further compounded by a consolidation among US distributors and the decline in the number of products going off-patent over the past few years.

In other words, acceleration in generic drug approvals is like a double-edged sword. The growth boost can be quickly offset by the ensuing pricing pressures. Pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market.

Therefore, despite a lot of pessimism surrounding pharma stocks on regulatory uncertainty, we have stocks in open positions in StockSelect and have remained bullish on pharma stocks in our long term service, ValuePro.

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Indian Share Market Update: Top Gainers and Losers