Sensex Trades 428 Points Up; SBI & Power Grid Lead the Rally

Mon, 27 Aug 12:30 pm

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Stock markets in India are trading strong following its global peers. Gains are largely seen in power stocks and bank stocks.

The BSE Sensex is trading up by 428 points and the NSE Nifty is trading up by 124 points. Meanwhile, the BSE Mid Cap index is trading up by 1% while, the BSE Small Cap index is trading up by 0.9%. The rupee is currently trading at 70.14 to the US$.

In news from the pharma sector. As per an article in a leading financial daily, The US Food and Drug Administration (USFDA) is conducting an inspection at Sun Pharma's Halol facility in Gujarat.

The site produces multiple dosage forms - from tablets to ointments to injectables - and was cleared by the US drug regulator in June, almost three years after a comprehensive remediation process was initiated.

Note that, the USFDA inspection at Halol in 2015 had resulted in 23 observations - a set of deficiencies in the manufacturing processes. The next inspection in 2016 resulted in nine observations and the last one conducted in February this year had cited three observations.

Interestingly, earlier this month Sun Pharma had announced a product recall of 5,215 units of 10 ml vials of testosterone cypionate injections from the US market. The product was manufactured at Halol.

The reason for the recall cited in media reports was the presence of particulate matter - organic and inorganic compounds detected in vials of the product.

But it remains to be seen whether the current inspection is actually triggered by the same recall or it is a smaller one only to approve a product or a few products. Pre-approval inspections are conducted if the USFDA intends to examine a site for approval of a single or a few products.

At the time of writing, Sun Pharma share price was trading down by 0.9%.

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.

In the news from the engineering sector. In the latest development, Larsen & Toubro's construction division has bagged an irrigation project order worth Rs 13.9 billion from Madhya Pradesh government.

Reportedly, L&T will execute the state's Kundalia irrigation project on engineering, procurement and construction basis.

The project aims to provide water for micro-irrigation to more than 64,000 Ha. of cultivable land in the Rajgarh district of Madhya Pradesh by lifting water from right bank of the Kundalia reservoir on the Kalisindh river.

Notably, diversification continues to help L&T negotiate and get better terms and margins for projects. Apparently, this is because it is less desperate to win orders as compared to a company which are present in only a couple of sectors. Its reputation, extensive technical prowess, and large skilled workforce have enabled L&T to command a certain premium from customers and vendors alike.

Whether, further addition to these new projects provides a cushion to its profitability will be an interesting thing to watch out for going forward.

To know more about the company, you can access to L&T's latest result analysis and L&T's 2017-18 Annual Report Analysis on our website.

At the time of writing, L&T share price was trading up by 0.8%.

Engineering stocks are presently trading on a mixed note with Jyoti Structures & Bharat Bijlee leading the pack of gainers.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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